Market operation through regulation of incoming order match allocation and/or dynamic resting order match allocation priorities

ABSTRACT

The disclosed embodiments relate to regulation of a rate of incoming orders by buffering or otherwise batching orders together as they are received and subsequently forwarding batches of orders to a match engine for processing thereby in a manner which may equalize orders from traders having varying abilities to rapid submit orders or otherwise capitalize on market events. The disclosed embodiments further relate to prioritizing the matching of resting orders against an incoming order. In particular, the disclosed embodiments alter the priority of a given resting order to match against an incoming order, relative to other suitably matching resting orders, as a function of how long the orders have been resting on the order book.

REFERENCE TO RELATED APPLICATIONS

This application is a continuation under 37 C.F.R. § 1.53(b) of U.S.patent application Ser. No. 14/644,525 filed Mar. 11, 2015, now U.S.Pat. No. 11,532,043, which claims the benefit of the filing date under35 U.S.C. § 119(e) of U.S. Provisional Application Ser. No. 61/951,147filed Mar. 11, 2014, the entirety of all of which are herebyincorporated by reference herein and relied upon.

BACKGROUND

A financial instrument trading system, such as a futures exchange,referred to herein also as an “Exchange”, such as the Chicago MercantileExchange Inc. (CME), provides a contract market where financialproducts/instruments, for example futures and options on futures, aretraded. Futures is a term used to designate all contracts for thepurchase or sale of financial instruments or physical commodities forfuture delivery or cash settlement on a commodity futures exchange. Afutures contract is a legally binding agreement to buy or sell acommodity at a specified price at a predetermined future time, referredto as the expiration date or expiration month. An option is the right,but not the obligation, to sell or buy the underlying instrument (inthis case, a futures contract) at a specified price within a specifiedtime. The commodity to be delivered in fulfillment of the contract, oralternatively, the commodity, or other instrument/asset, for which thecash market price shall determine the final settlement price of thefutures contract, is known as the contract's underlying reference or“underlier.” The terms and conditions of each futures contract arestandardized as to the specification of the contract's underlyingreference commodity, the quality of such commodity, quantity, deliverydate, and means of contract settlement. Cash Settlement is a method ofsettling a futures contract whereby the parties effect final settlementwhen the contract expires by paying/receiving the loss/gain related tothe contract in cash, rather than by effecting physical sale andpurchase of the underlying reference commodity at a price determined bythe futures contract price.

Typically, the Exchange provides for a centralized “clearing house”through which all trades made must be confirmed, matched, and settledeach day until offset or delivered. The clearing house is an adjunct tothe Exchange, and may be an operating division thereof, which isresponsible for settling trading accounts, clearing trades, collectingand maintaining performance bond funds, regulating delivery, andreporting trading data. The essential role of the clearing house is tomitigate credit risk. Clearing is the procedure through which theClearing House becomes buyer to each seller of a futures contract, andseller to each buyer, also referred to as a novation, and assumesresponsibility for protecting buyers and sellers from financial loss dueto breach of contract, by assuring performance on each contract. Aclearing member is a firm qualified to clear trades through the ClearingHouse.

Current financial instrument trading systems allow traders to submitorders and receive confirmations, market data, and other informationelectronically via a network. These “electronic” marketplaces havelargely supplanted the pit based trading systems whereby the traders, ortheir representatives, all physically stand in a designated location,i.e., a trading pit, and trade with each other via oral and hand basedcommunication. In contrast to the pit based trading system wherelike-minded buyers and sellers can readily find each other to trade,electronic marketplaces must electronically “match” the orders placed bybuyers and sellers on behalf thereof. Electronic trading systems mayoffer a more efficient and transparent system of trading. For example,in pit trading, subjective elements and limits on human interaction mayinfluence the process by which buyers and sellers come together to tradeor otherwise limit the trading opportunities, limiting market liquidity.In contrast, an electronic exchange may be more objective when matchingup a buyer and seller, relying solely on objective factors such as priceand time of order placement, etc. As such, electronic trading systemsmay achieve more fair and equitable matching among traders as well asidentify more opportunities to trade, thereby improving marketliquidity.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 depicts an illustrative computer network system that may be usedto implement aspects of the disclosed embodiments.

FIG. 2 depicts a block diagram of an exemplary implementation of thesystem of FIG. 1 for regulating incoming order.

FIG. 3 depicts a block diagram of an exemplary implementation of thesystem of FIG. 1 for prioritizing allocation of incoming orders toresting orders.

FIG. 4 shows an illustrative embodiment of a general computer system foruse with the system of FIGS. 1-3 .

FIG. 5 depicts a flow chart showing operation of the system of FIGS. 1and 2 .

FIG. 6 depicts a flow chart showing operation of the system of FIGS. 1and 3 .

FIGS. 7A-D depict exemplary order allocations according to the disclosedembodiments.

DETAILED DESCRIPTION

The disclosed embodiments relate to systems and methods which match orotherwise allocate an incoming order to trade with “resting,” i.e.,previously received but not yet matched (fully satisfied), orders,recognizing that the algorithm or rules by which the incoming order ismatched/allocated may affect the operation of the market for thefinancial product being traded. In particular, the disclosed embodimentsrelate to regulation of a rate of incoming orders by buffering orotherwise batching orders together as they are received and subsequentlyforwarding batches of orders to a match engine for processing thereby ina manner which may equalize orders from traders having varying abilitiesto rapidly submit orders or otherwise capitalize on market events. Thedisclosed embodiments further relate to prioritizing the matching ofresting orders against an incoming order. In particular, the disclosedembodiments alter the priority of a given resting order to match againstan incoming order, relative to other suitably matching resting orders,as a function of how long the orders have been resting on the orderbook.

While the disclosed embodiments may be discussed in relation to futuresand/or options on futures trading, it will be appreciated that they maybe applicable to any equity, options or futures trading system, e.g.,exchange, Electronic Communication Network (“ECN”), Alternative TradingSystem (“ATS”), or Swap Execution Facility (“SEF”), or market nowavailable or later developed, e.g. cash, Futures, etc., as well as anyinstrument traded thereon. It will be appreciated that a tradingenvironment, such as a futures exchange as described herein, implementsone or more economic markets where rights and obligations may be traded.As such, a trading environment may be characterized by a need tomaintain market integrity, transparency, predictability, fair/equitableaccess and participant expectations with respect thereto. For example,an exchange must respond to inputs, such as trade orders, cancellation,etc., in a manner as expected by the market participants, such as basedon market data, e.g., prices, available counter-orders, etc., to providean expected level of certainty that transactions will occur in aconsistent and predictable manner and without unknown or unascertainablerisks. In addition, it will be appreciated that electronic tradingsystems further impose additional expectations and demands by marketparticipants as to transaction processing speed, latency, capacity andresponse time, while creating additional complexities relating thereto.Accordingly, as will be described, the disclosed embodiments may furtherinclude functionality to ensure that the expectations of marketparticipant are met, e.g., that transactional integrity and predictablesystem responses are maintained.

As was discussed above, electronic trading systems ideally attempt tooffer an objective, efficient, fair and balanced market where marketprices reflect a true consensus of the value of products traded amongthe market participants, where the intentional or unintentionalinfluence of human interaction is minimized if not eliminated, and whereunfair or inequitable advantages with respect to information access areminimized if not eliminated.

Further, as discussed above, an exchange provides one or more marketsfor the purchase and sale of various types of products includingfinancial instruments such as stocks, bonds, futures contracts, options,currency, cash, and other similar instruments. Agricultural products andcommodities are also examples of products traded on such exchanges. Afutures contract is a product that is a contract for the future deliveryof another financial instrument such as a quantity of grains, metals,oils, bonds, currency, or cash. Generally, each exchange establishes aspecification for each market provided thereby that defines at least theproduct traded in the market, minimum quantities that must be traded,and minimum changes in price (e.g., tick size). For some types ofproducts (e.g., futures or options), the specification further defines aquantity of the underlying product represented by one unit (or lot) ofthe product, and delivery and expiration dates. As will be described,the Exchange may further define the matching algorithm, or rules, bywhich incoming orders will be matched/allocated to resting orders.

Some products on an exchange are traded in an open outcry environmentwhere the exchange provides a location for buyers and sellers to meetand negotiate a price for a quantity of a product. Other products aretraded on an electronic trading platform (e.g., an electronic exchange),also referred to herein as a trading platform, electronic tradingsystem, trading host or Exchange Computer System, where marketparticipants, e.g., traders, use software to send orders to the tradingplatform. The order identifies the product, the quantity of the productthe trader wishes to trade, a price at which the trader wishes to tradethe product, and a direction of the order (i.e., whether the order is abid, i.e., an offer to buy, or an ask, i.e., an offer to sell). It willbe appreciated that there may be other order types or messages thattraders can send including requests to modify or cancel a previouslysubmitted order.

In particular, electronic trading of financial instruments, such asfutures contracts, is conducted by market participants sending orders,such as to buy or sell one or more futures contracts, in electronic formto the Exchange. These electronically submitted orders to buy and sellare then matched, if possible, by the Exchange, i.e., by the Exchange'smatching engine, to execute a trade. Outstanding (unmatched, whollyunsatisfied/unfilled or partially satisfied/filled) orders aremaintained in one or more data structures or databases referred to as“order books,” such orders being referred to as “resting,” and madevisible, i.e., their availability for trading is advertised, to themarket participants through electronic notifications/broadcasts,referred to as market data feeds. An order book is typically maintainedfor each product, e.g., instrument, traded on the electronic tradingsystem and generally defines or otherwise represents the state of themarket for that product, i.e., the current prices at which the marketparticipants are willing buy or sell that product. As such, as usedherein, an order book for a product may also be referred to as a marketfor that product.

In the exemplary embodiments, all transactions for a particular marketmay be ultimately received at the electronic trading system via one ormore points of entry, e.g. one or more communications interfaces, atwhich the disclosed embodiments apply determinism, which as describedmay be at the point where matching occurs, e.g. at each match engine(where there may be multiple match engines, each for a givenproduct/market, or moved away from the point where matching occurs andcloser to the point where the electronic trading system first becomes“aware” of the incoming transaction, such as the point where transactionmessages, e.g. orders, ingress the electronic trading system. Generally,the terms “determinism” or “transactional determinism” may refer to theprocessing, or the appearance thereof, of orders in accordance withdefined business rules. Accordingly, as used herein, the point ofdeterminism may be the point at which the electronic trading systemascribes an ordering to incoming transactions/orders relative to otherincoming transactions/orders such that the ordering may be factored intothe subsequent processing, e.g., matching, of those transactions/ordersas will be described. See U.S. patent application Ser. No. 14/074,675,filed on Nov. 7, 2013, published as U.S. Pat. No. 9,691,102, entitled“TRANSACTIONALLY DETERMINISTIC HIGH SPEED FINANCIAL EXCHANGE HAVINGIMPROVED, EFFICIENCY, COMMUNICATION, CUSTOMIZATION, PERFORMANCE, ACCESS,TRADING OPPORTUNITIES, CREDIT CONTROLS, AND FAULT TOLERANCE”,incorporated by reference herein.

Upon receipt of an incoming order to trade in a particular financialinstrument, whether for a single component financial instrument, e.g. asingle futures contract, or for multiple component financialinstruments, e.g. a combination contract such as a spread contract, amatch engine, as will be described in detail below, will attempt toidentify a previously received but unsatisfied order counter thereto,i.e. for the opposite transaction (buy or sell) in the same financialinstrument at the same or better price (but not necessarily for the samequantity unless, for example, either order specifies a condition that itmust be entirely filled or not at all). Previously received butunsatisfied orders, i.e. orders which either did not match with acounter order when they were received or their quantity was onlypartially satisfied, referred to as a partial fill, are maintained bythe electronic trading system in an order book database/data structureto await the subsequent arrival of matching orders or the occurrence ofother conditions which may cause the order to be removed from the orderbook.

If the match engine identifies one or more suitable previously receivedbut unsatisfied counter orders, they, and the incoming order, arematched to execute a trade there between to at least partially satisfythe quantities of one or both the incoming order or the identifiedorders. If there remains any residual unsatisfied quantity of theidentified one or more orders, those orders are left on the order bookwith their remaining quantity to await a subsequent suitable counterorder, i.e., to rest. If the match engine does not identify a suitablepreviously received but unsatisfied counter order, or the one or moreidentified suitable previously received but unsatisfied counter ordersare for a lesser quantity than the incoming order, the incoming order isplaced on the order book, referred to as “resting”, with original orremaining unsatisfied quantity, to await a subsequently receivedsuitable order counter thereto. The match engine then generates matchevent data, as was described above, reflecting the result of thismatching process. Other components of the electronic trading system, aswill be described, then generate the respective order acknowledgment andmarket data messages and transmit those messages to the marketparticipants.

As was described above, the financial instruments which are the subjectof the orders to trade, may include one or more component financialinstruments. While each financial instrument may have its own orderbook, i.e., market, in which it may be traded, in the case of afinancial instrument having more than one component financialinstrument, those component financial instruments may further have theirown order books in which they may be traded. Accordingly, when an orderfor a financial instrument is received, it may be matched against asuitable counter order in its own order book or, possibly, against acombination of suitable counter orders in the order books the componentfinancial instruments thereof, or which share a common componentfinancial instrument. For example, an order for a spread contractcomprising component financial instruments A and B may be matchedagainst another suitable order for that spread contract. However, it mayalso be matched against suitable separate counter orders for the A andfor the B component financial instruments found in the order bookstherefore. Similarly, if an order for the A contract is received andsuitable match cannot be found in the A order book, it may be possibleto match order for A against a suitable counter order for a spreadcontract comprising the A and B component financial instruments and asuitable counter order for the B component financial instrument. This isreferred to as “implication” where a given order for a financialinstrument may be matched via a combination of suitable counter ordersfor financial instruments which share common, or otherwiseinterdependent, component financial instruments.

The order for a particular financial instrument actually received from amarket participant, whether it comprises one or more component financialinstruments, is referred to as a “real” or “outright” order, or simplyas an outright. The one or more orders which must be synthesized intoorder books other than the order book for the outright order in order tocreate matches therein, are referred to as “implied” orders. Uponreceipt of an incoming order, the identification or derivation ofsuitable implied orders which would allow at least a partial trade ofthe incoming outright order to be executed is referred to as “impliedmatching”, the identified orders being referred to as an “impliedmatch.” Depending on the number component financial instrumentsinvolved, and whether those component financial instruments furthercomprise component financial instruments of their own, there may benumerous different implied matches identified which would allow theincoming order to be at least partially matched and mechanisms may beprovided to arbitrate among them, such as by picking the implied matchcomprising the least number of component financial instruments or theleast number of synthesized orders.

Upon receipt of an incoming order, or thereafter, the identification orderivation of a combination of one or more suitable counter orders whichhave not actually been received but if they were received, would allowat least a partial trade of the incoming order to be executed, isreferred to as an “implied opportunity.” As with implied matches, theremay be numerous implied opportunities identified for a given incomingorder. Implied opportunities are advertised to the market participants,such as via suitable synthetic orders, e.g., counter to the desiredorder, being placed on the respective order books to rest (or give theappearance that there is an order resting) and presented via the marketdata feed to appear available to trade in order to solicit the desiredorders from the market participants. Depending on the number componentfinancial instruments involved, and whether those component financialinstruments further comprise component financial instruments of theirown, there may be numerous implied opportunities, the submissionthereof, would allow the incoming order to be at least partiallymatched.

Implied opportunities, e.g., the advertised synthetic orders, mayfrequently have better prices than the corresponding real orders in thesame contract. This can occur when two or more traders incrementallyimprove their order prices in the hope of attracting a trade, sincecombining the small improvements from two or more real orders can resultin a big improvement in their combination. In general, advertisingimplied opportunities at better prices will encourage traders to enterthe opposing orders to trade with them. The more implied opportunitiesthat the match engine of an electronic trading system cancalculate/derive, the greater this encouragement will be and the morethe Exchange will benefit from increased transaction volume. However,identifying implied opportunities may be computationally intensive. In ahigh performance trading system where low transaction latency isimportant, it may be important to identify and advertise impliedopportunities quickly so as to improve or maintain market participantinterest and/or market liquidity.

Matching, which is a function typically performed by the Exchange, is aprocess, for a given order which specifies a desire to buy or sell aquantity of a particular instrument at a particular price, ofseeking/identifying one or more wholly or partially, with respect toquantity, satisfying counter orders thereto, e.g. a sell counter to anorder to buy, or vice versa, for the same instrument at the same, orsometimes better, price (but not necessarily the same quantity), whichare then paired for execution to complete a trade between the respectivemarket participants (via the Exchange) and at least partially satisfythe desired quantity of one or both of the order and/or the counterorder, with any residual unsatisfied quantity left to await anothersuitable counter order, referred to as “resting.”

The Exchange Computer System, as will be described below, monitorsincoming orders received thereby and attempts to identify, i.e., matchor allocate, as will be described in more detail below, one or morepreviously received, but not yet matched, orders, i.e. limit orders tobuy or sell a given quantity at a given price, referred to as “resting”orders, stored in an order book database, wherein each identified orderis contra to the incoming order and has a favorable price relative tothe incoming order. An incoming order may be an “aggressor” order, i.e.,a market order to sell a given quantity at whatever may be the currentresting bid order price(s) or a market order to buy a given quantity atwhatever may be the current resting ask order price(s). An incomingorder may be a “market making” order, i.e., a market order to buy orsell at a price for which there are currently no resting orders. Inparticular, if the incoming order is a bid, i.e., an offer to buy, thenthe identified order(s) will be an ask, i.e., an offer to sell, at aprice that is identical to or higher than the bid price. Similarly, ifthe incoming order is an ask, i.e., an offer to sell, the identifiedorder(s) will be a bid, i.e., an offer to buy, at a price that isidentical to or lower than the offer price.

Upon identification (matching) of a contra order(s), a minimum of thequantities associated with the identified order and the incoming orderis matched and that quantity of each of the identified and incomingorders become two halves of a matched trade that is sent to aclearinghouse. The Exchange Computer System considers each identifiedorder in this manner until either all of the identified orders have beenconsidered or all of the quantity associated with the incoming order hasbeen matched, i.e., the order has been filled. If any quantity of theincoming order remains, an entry may be created in the order bookdatabase and information regarding the incoming order is recordedtherein, i.e., a resting order is placed on the order book for theremaining quantity to await a subsequent incoming order counter thereto.

Traders access the markets on a trading platform using trading softwarethat receives and displays at least a portion of the order book for amarket, i.e., at least a portion of the currently resting orders,enables a trader to provide parameters for an order for the producttraded in the market, and transmits the order to the Exchange ComputerSystem. The trading software typically includes a graphical userinterface to display at least a price and quantity of some of theentries in the order book associated with the market. The number ofentries of the order book displayed is generally preconfigured by thetrading software, limited by the Exchange Computer System, or customizedby the user. Some graphical user interfaces display order books ofmultiple markets of one or more trading platforms. The trader may be anindividual who trades on his/her behalf, a broker trading on behalf ofanother person or entity, a group, or an entity. Furthermore, the tradermay be a system that automatically generates and submits orders.

If the Exchange Computer System identifies that an incoming market ordermay be filled by a combination of multiple resting orders, e.g. theresting order at the best price does only partially fills the incomingorder, the Exchange Computer System may allocate the remaining quantityof the incoming, i.e. that which was not filled by the resting order atthe best price, among such identified orders in accordance withprioritization and allocation rules/algorithms, referred to as“allocation algorithms” or “matching algorithms,” as, for example, maybe defined in the specification of the particular financial product ordefined by the Exchange for multiple financial products. Similarly, ifthe Exchange Computer System identifies multiple orders contra to theincoming limit order and that have an identical price which is favorableto the price of the incoming order, i.e. the price is equal to orbetter, e.g. lower if the incoming order is a buy or higher if theincoming order is a sell, than the price of the incoming order, theExchange Computer System may allocate the quantity of the incoming orderamong such identified orders in accordance with the matching algorithmsas, for example, may be defined in the specification of the particularfinancial product or defined by the Exchange for multiple financialproducts.

As was noted above, an Exchange must respond to inputs, such as traderorders, cancellation, etc., in a manner as expected by the marketparticipants, such as based on market data, e.g. prices, availablecounter-orders, etc., to provide an expected level of certainty thattransactions will occur in a consistent and predictable manner andwithout unknown or unascertainable risks. Accordingly, the method bywhich incoming orders are matched with resting orders must be defined sothat market participants have an expectation of what the result will bewhen they place an order or have resting orders and incoming order isreceived, even if the expected result is, in fact, at least partiallyunpredictable due to some component of the process being random orarbitrary or due to market participants having imperfect or less thanall information, e.g. unknown position of an order in an order book.Typically, the Exchange defines the matching/allocation algorithm thatwill be used for a particular financial product, with or without inputfrom the market participants. Once defined for a particular product, thematching/allocation algorithm is typically not altered, except inlimited circumstance, such as to correct errors or improve operation, soas not to disrupt trader expectations. It will be appreciated thatdifferent products offered by a particular Exchange may use differentmatching algorithms.

For example, a first-in/first-out (FIFO) matching algorithm, alsoreferred to as a “Price Time” algorithm, considers each identified ordersequentially in accordance with when the identified order was received.The quantity of the incoming order is matched to the quantity of theidentified order at the best price received earliest, then quantities ofthe next earliest best price orders, and so on until the quantity of theincoming order is exhausted. Some product specifications define the useof a pro-rata matching algorithm, wherein a quantity of an incomingorder is allocated to each of plurality of identified ordersproportionally. Some Exchange Computer Systems provide a priority tocertain standing orders in particular markets. An example of such anorder is the first order that improves a price (i.e., improves themarket) for the product during a trading session. To be given priority,the trading platform may require that the quantity associated with theorder is at least a minimum quantity. Further, some Exchange ComputerSystems cap the quantity of an incoming order that is allocated to astanding order on the basis of a priority for certain markets. Inaddition, some Exchange Computer Systems may give a preference to orderssubmitted by a trader who is designated as a market maker for theproduct. Other Exchange Computer Systems may use other criteria todetermine whether orders submitted by a particular trader are given apreference. Typically, when the Exchange Computer System allocates aquantity of an incoming order to a plurality of identified orders at thesame price, the trading host allocates a quantity of the incoming orderto any orders that have been given priority. The Exchange ComputerSystem thereafter allocates any remaining quantity of the incoming orderto orders submitted by traders designated to have a preference, and thenallocates any still remaining quantity of the incoming order using theFIFO or pro-rata algorithms. Pro-rata algorithms used in some marketsmay require that an allocation provided to a particular order inaccordance with the pro-rata algorithm must meet at least a minimumallocation quantity. Any orders that do not meet or exceed the minimumallocation quantity are allocated to on a FIFO basis after the pro-rataallocation (if any quantity of the incoming order remains). Moreinformation regarding order allocation may be found in U.S. Pat. No.7,853,499, the entirety of which is incorporated by reference herein.

Other examples of matching algorithms which may be defined forallocation of orders of a particular financial product include:

-   -   Price Explicit Time    -   Order Level Pro Rata    -   Order Level Priority Pro Rata    -   Preference Price Explicit Time    -   Preference Order Level Pro Rata    -   Preference Order Level Priority Pro Rata    -   Threshold Pro-Rata    -   Priority Threshold Pro-Rata    -   Preference Threshold Pro-Rata    -   Priority Preference Threshold Pro-Rata    -   Split Price-Time Pro-Rata

For example, the Price Explicit Time trading policy is based on thebasic Price Time trading policy with Explicit Orders having priorityover Implied Orders at the same price level. The order of traded volumeallocation at a single price level may therefore be:

-   -   Explicit order with oldest timestamp first. Followed by    -   Any remaining explicit orders in timestamp sequence (First In,        First Out-FIFO) next. Followed by    -   Implied order with oldest timestamp next. Followed by    -   Any remaining implied orders in timestamp sequence (FIFO).

In Order Level Pro Rata, also referred to as Price Pro Rata, priority isgiven to orders at the best price (highest for a bid, lowest for anoffer). If there are several orders at this best price, equal priorityis given to every order at this price and incoming business is dividedamong these orders in proportion to their order size. The Pro Ratasequence of events is:

-   -   1. Extract all potential matching orders at best price from the        order book into a list.    -   2. Sort the list by order size, largest order size first. If        equal order sizes, oldest timestamp first. This is the matching        list.    -   3. Find the ‘Matching order size, which is the total size of all        the orders in the matching list.    -   4. Find the ‘tradable volume’, which is the smallest of the        matching volume and the volume left to trade on the incoming        order.    -   5. Allocate volume to each order in the matching list in turn,        starting at the beginning of the list. If all the tradable        volume gets used up, orders near the end of the list may not get        allocation.    -   6. The amount of volume to allocate to each order is given by        the formula:        (Order volume/Matching volume)*Tradable volume        -   The result is rounded down (for example, 21.99999999            becomes 21) unless the result is less than 1, when it            becomes 1.    -   7. If tradable volume remains when the last order in the list        had been allocated to, return to step 3.        -   Note: The matching list is not re-sorted, even though the            volume has changed. The order which originally had the            largest volume is still at the beginning of the list.    -   8. If there is still volume left to trade on the incoming order,        repeat the entire algorithm at the next price level.

Order Level Priority Pro Rata, also referred to as Threshold Pro Rata,is similar to the Price (or ‘Vanilla’) Pro Rata algorithm but has avolume threshold defined. Any pro rata allocation below the thresholdwill be rounded down to 0. The initial pass of volume allocation iscarried out in using pro rata; the second pass of volume allocation iscarried out using Price Explicit Time. The Threshold Pro Rata sequenceof events is:

-   -   1. Extract all potential matching orders at best price from the        order book into a list.    -   2. Sort the list by explicit time priority, oldest timestamp        first. This is the matching list.    -   3. Find the ‘Matching volume’, which is the total volume of all        the orders in the matching list.    -   4. Find the ‘tradable volume’, which is the smallest of the        matching volume and the volume left to trade on the incoming        order.    -   5. Allocate volume to each order in the matching list in turn,        starting at the beginning of the list.    -   6. The amount of volume to allocate to each order is given by        the formula:        (Order volume/Matching volume)*Tradable volume        -   The result is rounded down to the nearest lot (for example,            21.99999999 becomes 21) unless the result is less than the            defined threshold in which case it is rounded down to 0.    -   7. If tradable volume remains when the last order in the list        had been allocated to, the remaining volume is allocated in time        priority to the matching list.    -   8. If there is still volume left to trade on the incoming order,        repeat the entire algorithm at the next price level.

In the Split Price Time Pro-Rata algorithms, a Price Time Percentageparameter is defined. This percentage of the matching volume at eachprice is allocated by the Price Explicit Time algorithm and theremainder is allocated by the Threshold Pro-Rata algorithm. There arefour variants of this algorithm, with and without Priority and/orPreference. The Price Time Percentage parameter is an integer between 1and 99 (a percentage of zero would be equivalent to using the respectiveexisting Threshold Pro-Rata algorithm, and a percentage of 100 would beequivalent to using the respective existing Price Time algorithm). ThePrice Time Volume will be the residual incoming volume, after anypriority and/or Preference allocation has been made, multiplied by thePrice Time Percentage. Fractional parts will be rounded up, so the PriceTime Volume will always be at least 1 lot and may be the entire incomingvolume. The Price Time Volume is allocated to resting orders in stricttime priority. Any remaining incoming volume after the Price Time Volumehas been allocated will be allocated according to the respectiveThreshold Pro-Rata algorithm. The sequence of allocation, at each pricelevel, is therefore:

-   -   1. Priority order. if applicable    -   2. Preference allocation, if applicable    -   3. Price Time allocation of the configured percentage of        incoming volume    -   4. Threshold Pro-Rata allocation of any remaining incoming        volume    -   5. Final allocation of any leftover lots in time sequence.        -   Any resting order may receive multiple allocations from the            various stages of the algorithm.

It will be appreciated that there may be other allocation algorithms,including combinations of algorithms, now available or later developed,which may be utilized with the disclosed embodiments, and all suchalgorithms are contemplated herein.

One exemplary system for matching is described in U.S. patentapplication Ser. No. 13/534,499, filed on Jun. 27, 2012, entitled“MULTIPLE TRADE MATCHING ALGORITHMS,” published as U.S. PatentApplication Publication No. 2014/0006243 A1, incorporated by referenceherein, discloses an adaptive match engine which draws upon differentmatching algorithms, e.g. the rules which dictate how a given ordershould be allocated among qualifying resting orders, depending uponmarket conditions, to improve the operation of the market. For example,for a financial product, such as a futures contract, having a futureexpiration date, the match engine may match incoming orders according toone algorithm when the remaining time to expiration is above athreshold, recognizing that during this portion of the life of thecontract, the market for this product is likely to have high volatility.However, as the remaining time to expiration decreases, volatility maydecrease. Accordingly, when the remaining time to expiration falls belowthe threshold, the match engine switches to a different match algorithmwhich may be designed to encourage trading relative to the decliningtrading volatility. Thereby, by conditionally switching among matchingalgorithms within the same financial product, as will be described, thedisclosed match engine automatically adapts to the changing marketconditions of a financial product, e.g., a limited life product, in anon-preferential manner, maintaining fair order allocation whileimproving market liquidity, e.g., over the life of the product.

In one implementation, this trading system may evaluate marketconditions on a daily basis and, based thereon, change the matchingalgorithm between daily trading sessions, i.e., when the market isclosed, such that when the market reopens, a new trading algorithm is ineffect for the particular product. As will be described, the disclosedembodiments may facilitate more frequent changes to the matchingalgorithms so as to dynamically adapt to changing market conditions,e.g., intra-day changes, and even intra-order matching changes. It willbe further appreciated that hybrid matching algorithms, which match partof an order using one algorithm and another part of the order using adifferent algorithm, may also be used.

With respect to incoming orders, some traders, such as automated and/oralgorithmic traders, attempt to respond to market events, such as tocapitalize upon a mispriced resting order or other market inefficiency,as quickly as possible. This may result in penalizing the trader whomakes an errant trade, or whose underlying trading motivations havechanged, and who cannot otherwise modify or cancel their order fasterthan other traders can submit trades there against. It may consideredthat an electronic trading system that rewards the trader who submitstheir order first creates an incentive to either invest substantialcapital in faster trading systems, participate in the marketsubstantially to capitalize on opportunities (aggressor side/lower risktrading) as opposed to creating new opportunities (market making/higherrisk trading), modify existing systems to streamline business logic atthe cost of trade quality, or reduce one's activities and exposure inthe market. The result may be a lesser quality market and/or reducedtransaction volume, and corresponding thereto, reduced fees to theExchange.

The disclosed embodiments directed to incoming order regulation attemptto equalize the rate at which incoming orders are processed upon receiptto, for example, reduce, but not eliminate, the impact of speed.Incoming orders, once equalized, are then allocated for matching in amanner which may incentivize desired behavior. The disclosed embodimentsmay incentivize market making behavior over aggressor behavior toimprove and maintain market liquidity or health by, for example,reducing penalties for risk taking behavior, and incentivizingsubmission of orders which reflect the true intent of the marketparticipant, or at least a close approximation thereof, even if thatintent is to leverage anomalies or inefficiencies in the operations ofmarket or the electronic trading system. Furthermore, by reducing theincentive to invest in faster trading systems, the cost of which mayexponentially increase with respect to linear improvements, marketparticipants can devote more capital to investment and marketparticipation. In addition, by not eliminating the benefit of speedaltogether, speedy order submission may be rewarded where it improvesmarket liquidity/health.

With respect to resting orders, allocation/matching suitable restingorders to match against an incoming order can be performed, as describedabove, in many different ways. Generally, it will be appreciated thatallocation/matching algorithms are only needed when the incoming orderquantity is less than the total quantity of the suitable resting ordersas, only in this situation, is it necessary to decide which restingorder(s) will not be fully satisfied, which trader(s) will not get theirorders filled. It can be seen from the above descriptions of thematching/allocation algorithms, that they fall generally into threecategories: time priority/first-in-first-out (“FIFO”), pro rata, or ahybrid of FIFO and pro rata.

As described above, matching systems apply a single algorithm, orcombined algorithm, to all of the orders received for a particularfinancial product to dictate how the entire quantity of the incomingorder is to be matched/allocated. In contrast, the disclosed embodimentsmay apply different matching algorithms, singular or combined, todifferent orders, as will be described, recognizing that the allocationalgorithms used by the trading host for a particular market may, forexample, affect the liquidity of the market. Specifically, someallocation algorithms may encourage traders to submit more orders, whereeach order is relatively small, while other allocation algorithmsencourage traders to submit larger orders. Other allocation algorithmsmay encourage a trader to use an electronic trading system that canmonitor market activity and submit orders on behalf of the trader veryquickly and without intervention. As markets and technologies availableto traders evolve, the allocation algorithms used by trading hosts mustalso evolve accordingly to enhance liquidity and price discovery inmarkets, while maintaining a fair and equitable market.

FIFO generally rewards the first trader to place an order at aparticular price and maintains this reward indefinitely. So, if a traderis the first to place an order at price X, no matter how long that orderrests and no matter how many orders may follow at the same price, assoon as a suitable incoming order is received, that first trader will bematched first. This “first mover” system may commit other traders topositions in the queue after the first move traders. Furthermore, whileit may be beneficial to give priority to a trader who is first to placean order at a given price because that trader is, in effect, taking arisk, the longer that the trader's order rests, the less beneficial itmay be. For instance, it could deter other traders from adding liquidityto the marketplace at that price because they know the first mover (andpotentially others) already occupies the front of the queue.

With a pro rata allocation, incoming orders are effectively split amongsuitable resting orders. This provides a sense of fairness in thateveryone may get some of their order filled. However, a trader who tooka risk by being first to place an order (a “market turning” order) at aprice may end up having to share an incoming order with a much latersubmitted order. Furthermore, as a pro rata allocation distributes theincoming order according to a proportion based on the resting orderquantities, traders may place orders for large quantities, which theyare willing to trade but may not necessarily want to trade, in order toincrease the proportion of an incoming order that they will receive.This results in an escalation of quantities on the order book andexposes a trader to a risk that someone may trade against one of theseorders and subject the trader to a larger trade than they intended. Inthe typical case, once an incoming order is allocated against theselarge resting orders, the traders subsequently cancel the remainingresting quantity which may frustrate other traders. Accordingly, as FIFOand pro rata both have benefits and problems, Exchanges may try to usehybrid allocation/matching algorithms which attempt to balance thesebenefits and problems by combining FIFO and pro rata in some manner.However, hybrid systems define conditions or fixed rules to determinewhen FIFO should be used and when pro rata should be used. For example,a fixed percentage of an incoming order may be allocated using a FIFOmechanism with the remainder being allocated pro rata. The hybrid systemdiscussed above switches between FIFO and pro rata based on a conditionof the market.

The disclosed embodiments relate to a hybrid matching/allocationalgorithm which recognizes that, for example, the befit of time priorityto the market decays or otherwise degrades over time, rather than simplybased on the occurrence of an event, and, thus, implement a gradual timebased shift from a FIFO allocation method toward a hybrid FIFO/pro rataallocation methodology and, in one alternative embodiment, ultimately toa fully pro rata allocation method on an order by order basis. In thisexemplary embodiment, upon receipt of a resting order, it may beaccorded FIFO priority with respect to a subsequently received suitablymatching incoming order. However, until a matching incoming order isreceived, as that order, along with other suitably matching restingorder received subsequent thereto, age, they may be grouped or otherwiseclustered together, such as based on their temporal proximity to eachother. Each group may maintain a FIFO priority over other groups butwithin each group, an incoming order will be allocated pro rata. Thisgradual decay rewards first in time in a fast moving market butreduces/removes that benefit in a slower moving market.

The disclosed embodiments are preferably implemented with computerdevices and computer networks, such as those described with respect FIG.4 , that allow users, e.g., market participants or traders, to exchangetrading information. It will be appreciated that the plurality ofentities utilizing the disclosed embodiments, e.g. the marketparticipants, may be referred to by other nomenclature reflecting therole that the particular entity is performing with respect to thedisclosed embodiments and that a given entity may perform more than onerole depending upon the implementation and the nature of the particulartransaction being undertaken, as well as the entity's contractual and/orlegal relationship with another market participant and/or the exchange.An exemplary trading network environment for implementing tradingsystems and methods is shown in FIG. 1 . An electronic trading system100, referred also to as the “exchange” or “exchange computer system,”receives orders and transmits market data related to orders and tradesto users, such as via wide area network 126 and/or local area network124 and computer devices 114, 116, 118, 120 and 122, as will bedescribed below, coupled with the exchange computer system 100.

Herein, the phrase “coupled with” is defined to mean directly connectedto or indirectly connected through one or more intermediate components.Such intermediate components may include both hardware and softwarebased components. Further, to clarify the use in the pending claims andto hereby provide notice to the public, the phrases “at least one of<A>, <B>, . . . and <N>” or “at least one of <A>, <B>, . . . <N>, orcombinations thereof” are defined by the Applicant in the broadestsense, superseding any other implied definitions herebefore orhereinafter unless expressly asserted by the Applicant to the contrary,to mean one or more elements selected from the group comprising A, B, .. . and N, that is to say, any combination of one or more of theelements A, B, . . . or N including any one element alone or incombination with one or more of the other elements which may alsoinclude, in combination, additional elements not listed.

The electronic trading system 100 may be implemented with one or moremainframe, desktop or other computers, such as the computer 400described below with respect to FIG. 4 . A user database 102 may beprovided which includes information identifying traders and other usersof exchange computer system 100, such as account numbers or identifiers,user names and passwords. An account data module 104 may be providedwhich may process account information that may be used during trades. Amatch engine module 106 may be included to match bid and offer pricesand may be implemented with software that executes one or morealgorithms for matching bids and offers as will be described in moredetail below with respect to FIG. 2 . A trade database 108 may beincluded to store information identifying trades and descriptions oftrades. In particular, a trade database may store informationidentifying the time that a trade took place and the contract price. Anorder book module 110 may be included to compute or otherwise determinecurrent bid and offer prices. A market data module 112 may be includedto collect market data and prepare the data for transmission to users. Arisk management module 134 may be included to compute and determine auser's risk utilization in relation to the user's defined riskthresholds. An order processing module 136 may be included to decomposedelta based and bulk order types for processing by the order book module110 and/or match engine module 106. A volume control module 140 may beincluded to, among other things, control the rate of acceptance of massquote messages in accordance with one or more aspects of the disclosedembodiments. It will be appreciated that concurrent processing limitsmay be defined by or imposed separately or in combination, as wasdescribed above, on one or more of the trading system components,including the user database 102, the account data module 104, the matchengine module 106, the trade database 108, the order book module 110,the market data module 112, the risk management module 134, the orderprocessing module 136, or other component of the exchange computersystem 100.

The trading network environment shown in FIG. 1 includes exemplarycomputer devices 114, 116, 118, 120 and 122 which depict differentexemplary methods or media by which a computer device may be coupledwith the exchange computer system 100 or by which a user maycommunicate, e.g., send and receive, trade or other informationtherewith. It will be appreciated that the types of computer devicesdeployed by traders and the methods and media by which they communicatewith the electronic trading system 100 is implementation dependent andmay vary and that not all of the depicted computer devices and/ormeans/media of communication may be used and that other computer devicesand/or means/media of communications, now available or later developedmay be used. Each computer device, which may comprise a computer 400described in more detail below with respect to FIG. 4 , may include acentral processor that controls the overall operation of the computerand a system bus that connects the central processor to one or moreconventional components, such as a network card or modem. Each computerdevice may also include a variety of interface units and drives forreading and writing data or files and communicating with other computerdevices and with the exchange computer system 100. Depending on the typeof computer device, a user can interact with the computer with akeyboard, pointing device, microphone, pen device or other input devicenow available or later developed.

An exemplary computer device 114 is shown directly connected toelectronic trading system 100, such as via a T1 line, a common localarea network (LAN) or other wired and/or wireless medium for connectingcomputer devices, such as the network 420 shown in FIG. 4 and describedbelow with respect thereto. The exemplary computer device 114 is furthershown connected to a radio 132. The user of radio 132, which may includea cellular telephone, smart phone, or other wireless proprietary and/ornon-proprietary device, may be a trader or exchange employee. The radiouser may transmit orders or other information to the exemplary computerdevice 114 or a user thereof. The user of the exemplary computer device114, or the exemplary computer device 114 alone and/or autonomously, maythen transmit the trade or other information to the exchange computersystem 100.

Exemplary computer devices 116 and 118 are coupled with a local areanetwork (“LAN”) 124 which may be configured in one or more of thewell-known LAN topologies, e.g., star, daisy chain, etc., and may use avariety of different protocols, such as Ethernet, TCP/IP, etc. Theexemplary computer devices 116 and 118 may communicate with each otherand with other computer and other devices which are coupled with the LAN124. Computer and other devices may be coupled with the LAN 124 viatwisted pair wires, coaxial cable, fiber optics or other wired orwireless media. As shown in FIG. 1 , an exemplary wireless personaldigital assistant device (“PDA”) 122, such as a mobile telephone, tabletbased computer device, or other wireless device, may communicate withthe LAN 124 and/or the Internet 126 via radio waves, such as via WiFi,Bluetooth and/or a cellular telephone based data communicationsprotocol. PDA 122 may also communicate with exchange computer system 100via a conventional wireless hub 128.

FIG. 1 also shows the LAN 124 coupled with a wide area network (“WAN”)126 which may be comprised of one or more public or private wired orwireless networks. In one embodiment, the WAN 126 includes the Internet126. The LAN 124 may include a router to connect LAN 124 to the Internet126. Exemplary computer device 120 is shown coupled directly to theInternet 126, such as via a modem, DSL line, satellite dish or any otherdevice for connecting a computer device to the Internet 126 via aservice provider therefore as is known. LAN 124 and/or WAN 126 may bethe same as the network 420 shown in FIG. 4 and described below withrespect thereto.

As was described above, the users of the exchange computer system 100may include one or more market makers 130 which may maintain a market byproviding constant bid and offer prices for a derivative or security tothe electronic trading system 100, such as via one of the exemplarycomputer devices depicted. The electronic trading system 100 may alsoexchange information with other trade engines, such as trade engine 138.One skilled in the art will appreciate that numerous additionalcomputers and systems may be coupled to exchange computer system 100.Such computers and systems may include clearing, regulatory and feesystems.

The operations of computer devices and systems shown in FIG. 1 may becontrolled by computer-executable instructions stored on anon-transitory computer-readable medium. For example, the exemplarycomputer device 116 may include computer-executable instructions forreceiving order information from a user and transmitting that orderinformation to electronic trading system 100. In another example, theexemplary computer device 118 may include computer-executableinstructions for receiving market data from electronic trading system100 and displaying that information to a user.

Of course, numerous additional servers, computers, handheld devices,personal digital assistants, telephones and other devices may also beconnected to the electronic trading system 100. Moreover, one skilled inthe art will appreciate that the topology shown in FIG. 1 is merely anexample and that the components shown in FIG. 1 may include othercomponents not shown and be connected by numerous alternativetopologies.

FIG. 2 depicts a block diagram of an order processor module 136according to one embodiment, which in an exemplary implementation, isimplemented as part of the exchange computer system 100 described above.As used herein, an electronic trading system 100, i.e., exchange,includes a place or system that receives and/or executes orders. It willbe appreciated that the disclosed embodiments may be implemented by orin conjunction with other modules or components of the electronictrading. While the disclosed embodiments will be described with respectto a separate implementation for each match engine, market or orderbook, it will be appreciated that the disclosed embodiments may also beimplemented across the entire electronic trading system 100 such as forexample, by further denoting incoming orders by their intended marketand separately processing orders received for a given market asdescribed herein.

In particular, FIG. 2 depicts a block diagram of a system 200, which mayalso be referred to as an architecture, for regulating incoming orderallocation in an electronic trading system 100, such as incoming ordersto trade a financial product, received via a network, such as thenetwork 126 of FIG. 1 , from a plurality of market participants.Wherein, as described, the electronic trading system 100 comprising amatch engine 106 which implements a market for an associated financialinstrument by being operative to attempt to match an incoming order fora transaction for the associated financial instrument with at least oneother previously received but unsatisfied order for a transactioncounter thereto for the associated financial instrument, to at leastpartially satisfy one or both of the incoming order or the at least oneother previously received order.

The system 200 includes an interval processor 206, which may beimplemented as a separate component or as one or more logic components,such as on an FPGA which may include a memory or reconfigurablecomponent to store logic and processing component to execute the storedlogic, or as first logic 206, e.g. computer program logic, stored in amemory 204, or other non-transitory computer readable medium, andexecutable by a processor 202, such as the processor 402 and memory 404described below with respect to FIG. 4 , to cause the processor 202 to,or otherwise be operative to, determine an occurrence of an event.

The system 200 further includes an incoming order receiver 208, whichmay be implemented as a separate component or as one or more logiccomponents, such as on an FPGA which may include a memory orreconfigurable component to store logic and processing component toexecute the stored logic, or as second logic 208, e.g. computer programlogic, stored in a memory 204, or other non-transitory computer readablemedium, and executable by a processor 202, such as the processor 402 andmemory 404 described below with respect to FIG. 4 , to cause theprocessor 202 to, or otherwise be operative to, receive an incomingorder and store, or otherwise collect, aggregate, buffer or batch, thereceived incoming order in a memory 212/204 coupled with the orderreceiver 208, such as an incoming order buffer 212, which may be a partof the memory 204 or separate therefrom.

The system 200 further includes an order forwarder 210, coupled with thememory 212/204, the order receiver 208 and the interval processor 206,and which may be implemented as a separate component or as one or morelogic components, such as on an FPGA which may include a memory orreconfigurable component to store logic and processing component toexecute the stored logic, or as third logic 210, e.g. computer programlogic, stored in a memory 204, or other non-transitory computer readablemedium, and executable by a processor 202, such as the processor 402 andmemory 404 described below with respect to FIG. 4 , to cause theprocessor 202 to, or otherwise be operative to, upon the occurrence ofthe event, forward at least a subset of the stored received incomingorders to the match engine 106.

In effect, the disclosed embodiments may align or otherwise normalizeincoming orders, or the rate of receipt thereof, to the occurrence of anevent, which as described below, may be a time interval. This may resultin the equalization of the value, e.g., as being earlier, of each orderor otherwise alter their relative value. By configuring the event as theexpiration of a fixed or variable time interval, to a system event suchan indication of available or over capacity or other feedback signal, orto the receipt of an incoming order, or combinations thereof, incomingorders, or the rate of receipt thereof, may be aligned to a commonrate/clock, the electronic trading system's 100 capacity to processorders, and/or relative to other orders, such as to equalize orderssubmitted by automated and/or algorithmic traders with order submittedby traders who are less fast. Once grouped, buffered or otherwisebatched, the event, which may be the next clock edge, a signal from thematch engine 106, or some other indicator, causes all of the storedorders to be sent to the match engine 106 for matching. As will bedescribed, the match engine 106 may then decide how to process theorders out of each batch.

As an example, the following orders may be received (with their time ofreceipt in parentheses): A(1 ms), B(2 ms), C(10 ms) D(14 ms), E(16 ms),F(22 ms). Where the event is the expiration of a clock having a 5 msperiod, the orders would be batched as follows: AB, CDE, F.

In one embodiment, the incoming order receiver 208 is further operativeto receive the incoming order when the incoming order's arrival relativeto another incoming order has been determined, e.g., at the match engine106 or otherwise at the point of incoming order ingress or other pointof determinism as was described above. Incoming order receiver maypreserve or otherwise store data indicative of the order of arrival witheach incoming order. In one embodiment, the interval processor 206,incoming order receiver 208 and order forwarder 210 are comprised by thematch engine 106.

In one embodiment, each order is characterized by any of a set of ordertypes, the order forwarder being further operative to forward orotherwise bypass the incoming order to the match engine upon receiptthereof when the order type thereof is one of a subset of the set oforder types. For example, in one embodiment, the subset of order typesincludes at least one of administrative message, control message, cancelmessage, order modification message, or combinations thereof. Ordermodification messages may include messages which alter an order that wasearlier received but not yet matched or a resting order, e.g., modifiesthe resting quantity. This may permit the match engine act on cancel ormodify messages, for example, in advance of other messages, such asorders which would have matched against the order to be canceled. Itwill be appreciated that whether cancel or modify messages are processedfirst or last, or otherwise in order of receipt, is implementationdependent and may depend on business and/or regulatory rules defininghow and when a trader may cancel an order. As an alternative tobypassing orders around the batching mechanism, these order types may beflagged to be allocated first or last out of the batch when the batch oforders is forwarded to the match engine. In an implementation designed,at least in part, to regulate incoming order flow relative to thecapacity of the system, e.g., where the event which triggers forwardingis based on a signal indicative of processing capacity, this would allowthe match engine 106 process such messages according to its processingcapacity.

In one embodiment, the event comprises an elapse of an interval orwindow of time and may be defined by when the window opens and theduration thereof. In one embodiment, the event may be caused by acontinually rolling clock, e.g., a gating clock, where each clock edgeis an event which defines/separates a batch of orders.

In one embodiment, the time interval begins to elapse upon receipt of anincoming order, e.g., a batchable order (one that, for example, wouldnot be bypassed as described herein), subsequent to a prior elapse ofthe time interval. As described above, this may permit regulation ofincoming orders relative to each other by triggering the buffering uponreceipt of a first order, after a prior batch has been forwarded, andbuffering for a duration of time or until a subsequent event occurs asdescribed herein.

In one embodiment, the duration of the time interval is fixed.Alternatively, in one embodiment, the duration of the time interval isvariable and may vary at least partially, i.e., pseudo, or fully/trulyrandomly and/or based on a condition of the market for the associatedfinancial instrument, such as market volatility, order volume, ordervelocity, or combinations thereof, or other feedback loop/signalindicative of market conditions and/or system capacity. In oneembodiment, the duration of the time interval may be alteredperiodically. It will be appreciated that a variable time interval maybe harder to predict by market participants looking to advantageouslytime the submission of their orders with respect thereto. However it maybe expected that market participants will always want to be the earliestorder among any given batch of incoming orders, in particular forexample, if, as in one exemplary embodiment, the resulting allocationout of the batch preferences orders at the start of the batch.

In one embodiment, the event may be the receipt of an acknowledgmentfrom the match engine acknowledging receipt of previously forwardedincoming orders. As described above, this may be used to regulate orderflow based on processing resource capacity.

In one embodiment, the event may be the number of stored receivedincoming orders exceeds a threshold. For example, the number of ordersallowed to be batched in any one batch may be limited. Such an orderlimit may be utilized in conjunction with the other implementationsdescribed herein, such as a time interval, to cap the number of ordersthat may be stored prior to forwarding. In a fast moving market, wherethe rate of order submission is high, this may prevent the buffer memoryfrom being overflowed or otherwise batching together more orders thanthe match engine 106 can effectively handle. In an alternativeembodiment, threshold number of orders may be a minimum wherein incomingorders are batched until a minimum number of orders have been receivedbefore forwarding. This embodiment may be further combined with a timeduration so as to not overly delay processing of orders, such as in aslow moving market where order submissions are less frequent.

In one embodiment, the received incoming orders are stored in the memoryin association with data indicative of time and/or order of receipt bythe order receiver. For example, this data may be utilized by the matchengine 106 to allocate orders out of the batch when performing thematching process.

In one embodiment, an incoming order stored in the buffer memory 212 maybe held back and not forwarded with the batch of orders it is storedwith. For example, a trader may be permitted to subsequently send a holdmessage or some other indication that they may wish to delay their priororder. Incoming orders may be held when the electronic trading system100, via a system, not shown, which evaluates orders for compliance withbusiness and/or regulatory rules, determines that an incoming order issuspicious or otherwise anomalous and should be delayed pending furtherreview. In another example, incoming orders determined to exacerbate ahighly volatile market may be delayed in order to prevent or mitigate amarket crash or other undesirable market event.

In one embodiment, the order forwarder 210 may be further operative toallow a subsequently received incoming transaction/order to modify orcancel a stored received incoming order prior to a forwarding thereof tothe match engine. By, for example, allowing orders to be canceled ormodified prior to forwarding, the processing demands on the match engine106 may be reduced.

Once a batch of incoming orders has been forwarded to the match engine106, the match engine 106 must determine the order/sequence in whichthose orders within a batch will be processed against the resting ordersof the order book. In one embodiment, the match engine 106 is furtheroperative to determine a sequence in which the match engine 106 willattempt to match each of the forwarded subset of the received incomingorders. In one implementation, the match engine 106 may include anarriving order allocator 214, which may be implemented as a separatecomponent or as one or more logic components, such as on an FPGA whichmay include a memory or reconfigurable component to store logic andprocessing component to execute the stored logic, or as logic, e.g.computer program logic, stored in a memory (not shown), or othernon-transitory computer readable medium, and executable by a processor(not shown), such as the processor 402 and memory 404 described belowwith respect to FIG. 4 , to cause the processor 202 to, or otherwise beoperative to, determine a sequence in which the match engine 106 willattempt to match each of the forwarded subset of the received incomingorders. While the arriving order allocator 214 is described herein aspart of the match engine 106, it will be appreciated that it may beseparate therefrom and may be part of the system 200 or implementedbetween the system 200 and the match engine 106.

Generally, the sequence may be determined based on order of arrival, asa function of order of arrival or without regard to order of arrival.Further, the allocation methodology may be different for differentmarkets and may vary within a market or otherwise be fixed. It will beappreciated that the selection of the allocation methodology will bebased on the degree to which it is desirable to flatten out or removethe benefit of speed of order submission, e.g., the benefit of beingfirst. As will be seen, orders may be allocated all at once, subject topreferenced orders being processed first, or orders may be processed byorder type or classification of orders and then within eachclassification, those orders may be processed by time, randomly or viasome other allocation methodology as will be described.

In on embodiment, the allocation methodology may determine the sequenceto be at least partially, e.g., pseudo, or fully/truly random, e.g.,orders are randomly selected out of the batch to be processed, subjectto constraints such as order of arrival among orders of the same marketparticipant as described below. In one embodiment, the determination ofthe sequence may weight the chance of random selection each of thesubset of the received incoming orders by an associated time of arrival,which may be referred to as Lottery-Time. Alternatively, thedetermination of the sequence may weight the chance of selection of eachof the subset of the received incoming orders by an ordinal position,i.e., an order of receipt by the incoming order receiver relative to theothers of the subset of the received incoming orders, which may bereferred to as Lottery-Position.

In on embodiment, the allocation methodology may determine the sequenceto be first-in-first-out (“FIFO”), e.g., in order of an associated timeof arrival of each of the subset of the received incoming orders at theincoming order receiver. As was described above, this may be used in animplementation which regulates incoming order flow relative to theprocessing capacity of the electronic trading system 100.

In one embodiment, the allocation methodology may determine the sequenceto be that all orders of the forwarded subset of the received incomingorders are processed concurrently such as a proportional allocation,e.g., pro-rata, or via an auction/micro-auction (matched byprice-time-priority). With respect to a proportional allocation, such asa pro-rata allocation, when the two or more incoming orders of a batchmay be for a total quantity greater than a total quantity of suitablecounter orders currently resting on the order book, each of the incomingorders may be allocated pro rata share of the resting quantity with anyresidual unsatisfied quantity of those incoming orders then being restedon the order book. In one embodiment, time of arrival for ordersdetermined to share a proportional allocation may be used to skew thatallocation, such as to provide a bigger allocation to earlier arrivingorders. It will be appreciated that, with respect to allocation of alesser available resting quantity to a greater desired quantity of theincoming orders, any of the allocation methodologies described herein,including the decay methodology described below, for allocating a lesserquantity of the incoming orders to a greater available quantity of theresting orders may be applied. Accordingly, when orders are taken out ofa batch and exposed to the order book, they need not be filled in full,as long as the order book isn't crossed, i.e. when a bid order exists onthe order book at a price less than an ask order on the order book at alower price, after all orders are exposed to the book.

In one embodiment, incoming orders may be allocated out of a batch oforders based on price level such that orders with a better price aresent to the match engine first.

In one embodiment, wherein an incoming order may further comprise arequest to modify or cancel a previously forwarded received incomingorder for a transaction of the associated financial instrument, thematch engine 106 or arriving order allocator 214 may be furtheroperative to process the request to modify or cancel ahead of or afterprocessing the others of the forward subset of received incoming orders.Processing cancels first, as was described above, may allow a trader tocancel an order before another trader can capitalize on it. Processingcancels last may promote increased trading volume.

In one embodiment, incoming orders within a batch of orders may beanalyzed to determine if multiple orders from the same marketparticipant are in the same batch. In this case, the disclosedembodiments may process those orders from the same market participant inthe order or receipt to forward to the match engine. For example, whenusing a random or pseudo random allocation out of each batch, thedisclosed embodiments may implement the random selection based on theidentity of the market participant and then, where multiple incomingorders from that market participant exist in the batch of incomingorders, those orders will be allocated in order of receipt.Alternatively, when multiple incoming orders are detected from the samemarket participant, random selection of one of those orders forallocation may be subject to an order of arrival priority.

In one embodiment, the match engine 106 or arriving order allocator 214may be further operative to detect when two or more of the forwardedsubsets of received incoming orders are counter to each other and havebeen submitted by a single trading entity and prevent those two or moreorders from matching to each other. Such “self trading” detection may beimplemented in accordance with business and/or regulatory rulesimplemented by the electronic trading system 100. It will be appreciatedthat, in one alternative embodiment, the match engine 106 may attempt toidentify suitable counter orders from other traders so as to completethe transactions, if possible, for all of the participants.

FIG. 5 depicts a flow chart showing operation of the system 200 of FIG.2 . In particular FIG. 3 shows a computer implemented method ofregulating incoming order allocation in an electronic trading system100, the electronic trading system 100 comprising a match engine 106which implements a market for an associated financial instrument bybeing operative to attempt to match an incoming order for a transactionfor the associated financial instrument with at least one otherpreviously received but unsatisfied order for a transaction counterthereto for the associated financial instrument, to at least partiallysatisfy one or both of the incoming order or the at least one otherpreviously received order.

The operation of the system 200 includes: determining, by an incomingorder processor 202, an occurrence of an event [Block 502]; receiving,by the incoming order processor 202, an incoming order and storing thereceived incoming order in a memory 204/212 coupled with the incomingorder processor [Block 504]; and forwarding by the incoming orderprocessor 202, upon the occurrence of the event, at least a subset ofthe stored received incoming orders to the match engine 106 [Block 506].

In effect, the disclosed embodiments may align or otherwise normalizeincoming orders, or the rate of receipt thereof, to the occurrence of anevent, which as described below, may be a time interval. This may resultin the equalization of the value, e.g., as being earlier, of each orderor otherwise alter their relative value. By configuring the event as theexpiration of a fixed or variable time interval, to a system event suchan indication of available or over capacity or other feedback signal, orto the receipt of an incoming order, or combinations thereof, incomingorders, or the rate of receipt thereof, may be aligned to a commonrate/clock, the electronic trading system's 100 capacity to processorders, and/or relative to other orders, such as to equalize orderssubmitted by automated and/or algorithmic speed traders with ordersubmitted by traders who are less fast. Once grouped, buffered orotherwise batched, the event, which may be the next clock edge, a signalfrom the match engine 106, or some other indicator, causes all of thestored orders to be sent to the match engine 106 for matching. As willbe described, the match engine 106 may then decide how to process theorders out of each batch.

As an example, the following orders may be received (with their time ofreceipt in parentheses): A(1 ms), B(2 ms), C(10 ms) D(14 ms), E(16 ms),F(22 ms). Where the event is the expiration of a clock having a 5 msperiod, the orders would be batched as follows: AB, CDE, F.

In one embodiment, the receiving, by the incoming order processor 202,further includes receiving the incoming order when the incoming order'sarrival relative to another incoming order has been determined, e.g., atthe match engine 106 or otherwise at the point of incoming order ingressor other point of determinism as was described above. In one embodiment,the determining, receiving and forwarding are performed by the matchengine 106.

In one embodiment, the duration of the time interval is fixed.Alternatively, in one embodiment, the duration of the time interval isvariable and may vary at least partially, i.e., pseudo, or fully/trulyrandomly and/or based on a condition of the market for the associatedfinancial instrument, such as market volatility, order volume, ordervelocity, or combinations thereof, or other feedback loop/signalindicative of market conditions and/or system capacity. In oneembodiment, the duration of the time interval may be alteredperiodically. It will be appreciated that a variable time interval maybe harder to predict by market participants looking to advantageouslytime the submission of their orders with respect thereto. However it maybe expected that market participants will always want to be the earliestorder among any given batch of incoming orders.

In one embodiment, the event may be the receipt of an acknowledgmentfrom the match engine acknowledging receipt of previously forwardedincoming orders. As described above, this may be used to regulate orderflow based on processing resource capacity.

In one embodiment, the event may be the number of stored receivedincoming orders exceeds a threshold. For example, the number of ordersallowed to be batched in any one batch may be limited. Such an orderlimit may be utilized in conjunction with the other implementationsdescribed herein, such as a time interval, to cap the number of ordersthat may be stored prior to forwarding. In a fast moving market, wherethe rate of order submission is high, this may prevent the buffer memoryfrom being overflowed or otherwise batching together more orders thanthe match engine 106 can effectively handle. In an alternativeembodiment, threshold number of orders may be a minimum wherein incomingorders are batched until a minimum number of orders have been receivedbefore forwarding. This embodiment may be further combined with a timeduration so as to not overly delay processing of orders, such as in aslow moving market where order submissions are less frequent.

In one embodiment, the received incoming orders are stored in the memoryin association with data indicative of time and/or order of receipt bythe order receiver. For example, this data may be utilized by the matchengine 106 to allocate orders out of the batch when performing thematching process.

In one embodiment, an incoming order stored in the buffer memory 212 maybe held back and not forwarded with the batch of orders it is storedwith. For example, a trader may be permitted to subsequently send a holdmessage or some other indication that they may wish to delay their priororder. Incoming orders may be held when the electronic trading system100, via a system, not shown, which evaluates orders for compliance withbusiness and/or regulatory rules, determines that an incoming order issuspicious or otherwise anomalous and should be delayed pending furtherreview. In another example, incoming orders determined to exacerbate ahighly volatile market may be delayed in order to prevent or mitigate amarket crash or other undesirable market event.

In one embodiment, the operation of the system 200 further includesallowing a subsequently received incoming order to modify or cancel astored received incoming order prior to a forwarding thereof to thematch engine [Block 508]. By, for example, allowing orders to becanceled or modified prior to forwarding, the processing demands on thematch engine 106 may be reduced.

In one embodiment, the operation of the system 200 further includesdetermining a sequence in which the match engine 106 will attempt tomatch each of the forwarded subset of the received incoming orders[Block 510].

Generally, the sequence may be determined based on order of arrival, asa function of order of arrival or without regard to order of arrival.Further, the allocation methodology may be different for differentmarkets and may vary within a market or otherwise be fixed. It will beappreciated that the selection of the allocation methodology will bebased on the degree to which it is desirable to flatten out or removethe benefit of speed of order submission, e.g., the benefit of beingfirst. As will be seen, orders may be allocated all at once, subject topreferenced orders being processed first, or orders may be processed byorder type or classification of orders and then within eachclassification, those orders may be processed by time, randomly or viasome other allocation methodology as will be described.

In on embodiment, the allocation methodology may determine the sequenceto be at least partially, e.g., pseudo, or fully/truly random, e.g.,orders are randomly selected out of the batch to be processed subjectto, for example, constraints such as order of arrival for ordersreceived from the same market participant. In one embodiment, thedetermination of the sequence may weight the chance of random selectioneach of the subset of the received incoming orders by an associated timeof arrival, which may be referred to as Lottery-Time. Alternatively, thedetermination of the sequence may weight the chance of selection of eachof the subset of the received incoming orders by an ordinal position,i.e., an order of receipt by the incoming order receiver relative to theothers of the subset of the received incoming orders, which may bereferred to as Lottery-Position.

In on embodiment, the allocation methodology may determine the sequenceto be first-in-first-out (“FIFO”), e.g., in order of an associated timeof arrival of each of the subset of the received incoming orders at theincoming order receiver. As was described above, this may be used in animplementation which regulates incoming order flow relative to theprocessing capacity of the electronic trading system 100.

In on embodiment, the allocation methodology may determine the sequenceto be that all orders of the forwarded subset of the received incomingorders are processed concurrently such as a proportion allocation, e.g.,pro-rata, or via a micro-auction (matched by price-time-priority),factoring in or otherwise ignoring time of arrival. As described above,any allocation methodology described herein with respect to allocating alesser total incoming order quantity to a greater total restingquantity, including the decay methodology described below, may be usedherein for the purpose of allocating a greater total incoming orderquantity to a lesser total resting order quantity. Alternatively, or inaddition thereto, the sequence of processing orders may be by pricelevel such that orders at better prices are matched first.

In one embodiment, wherein an incoming order may further comprise arequest to modify or cancel a previously forwarded received incomingorder for a transaction of the associated financial instrument, thematch engine 106 or arriving order allocator 214 may be furtheroperative to process the request to modify or cancel ahead of or afterprocessing the others of the forward subset of received incoming orders.Processing cancels first, as was described above, may allow a trader tocancel an order before another trader can capitalize on it. Processingcancels last may increase trading volume.

In one embodiment, the operation of the system 200 further includesdetecting when two or more of the forwarded subsets of received incomingorders are counter to each other and have been submitted by a singletrading entity and prevent those two or more orders from matching toeach other [Block 512]. Such “self trading” detection may be implementedin accordance with business and/or regulatory rules implemented by theelectronic trading system 100. It will be appreciated that, in onealternative embodiment, the match engine 106 may attempt to identifysuitable counter orders from other traders so as to complete thetransactions, if possible, for all of the participants.

FIG. 3 depicts a block diagram of a match engine module 106 according toone embodiment, which in an exemplary implementation, is implemented aspart of the exchange computer system 100 described above. As usedherein, an electronic trading system 100, i.e., exchange, includes aplace or system that receives and/or executes orders. It will beappreciated that the disclosed embodiments may be implemented by or inconjunction with other modules or components of the electronic trading.While the disclosed embodiments will be described with respect to aseparate implementation for each match engine, market or order book, itwill be appreciated that the disclosed embodiments may also beimplemented across the entire electronic trading system 100 such as forexample, by further denoting incoming orders by their intended marketand separately processing orders received for a given market asdescribed herein.

In particular, FIG. 3 depicts a block diagram of a system 300, which mayalso be referred to as an architecture, for determining, by anelectronic trading system 100, an allocation of an incoming order for atransaction of a quantity of a financial instrument at an order priceamong a plurality of previously received but unsatisfied orders, storedin a first memory 110, e.g. a match engine memory 110 or order bookmemory/database 110, for a transaction counter thereto at the orderprice for a total quantity of the financial instrument that is less thanthe quantity of the incoming order, wherein each of the plurality ofpreviously received but unsatisfied orders is characterized by a time ofreceipt at which the previously received but unsatisfied order wasreceived by the electronic trading system 100, such as incoming ordersto trade a financial product, received via a network, such as thenetwork 126 of FIG. 1 , from a plurality of market participants.Wherein, as described, the electronic trading system 100 comprising amatch engine 106 which implements a market for an associated financialinstrument by being operative to attempt to match an incoming order fora transaction for the associated financial instrument with at least oneother previously received but unsatisfied order for a transactioncounter thereto for the associated financial instrument, to at leastpartially satisfy one or both of the incoming order or the at least oneother previously received order.

The system 300 includes an match engine order receiver 306, which may beimplemented as a separate component or as one or more logic components,such as on an FPGA which may include a memory or reconfigurablecomponent to store logic and processing component to execute the storedlogic, or as first logic 306, e.g. computer program logic, stored in amemory 304, or other non-transitory computer readable medium, andexecutable by a processor 302, such as the processor 402 and memory 404described below with respect to FIG. 4 , to cause the processor 302 to,or otherwise be operative to, receive the incoming order.

The system 300 further includes an order monitor 308, coupled with thematch engine memory 110, which may be implemented as a separatecomponent or as one or more logic components, such as on an FPGA whichmay include a memory or reconfigurable component to store logic andprocessing component to execute the stored logic, or as second logic308, e.g. computer program logic, stored in a memory 304, or othernon-transitory computer readable medium, and executable by a processor302, such as the processor 402 and memory 404 described below withrespect to FIG. 4 , to cause the processor 302 to, or otherwise beoperative to, determine an elapse of time and based on the magnitudethereof, divide the plurality of previously received but unsatisfiedorders into at least one non-overlapping subset thereof, each comprisingat least one of the plurality of previously received but unsatisfiedorders, as a function of the time of receipt thereof.

The system 300 further includes an order allocator 310, coupled with thematch engine memory 110, the match engine order receiver 306 and theorder monitor 308, and which may be implemented as a separate componentor as one or more logic components, such as on an FPGA which may includea memory or reconfigurable component to store logic and processingcomponent to execute the stored logic, or as third logic 308, e.g.computer program logic, stored in a memory 304, or other non-transitorycomputer readable medium, and executable by a processor 302, such as theprocessor 402 and memory 404 described below with respect to FIG. 4 , tocause the processor 302 to, or otherwise be operative to, allocate thequantity of the incoming order to each of the at least one subset ofpreviously received but unsatisfied orders according to a firstallocation algorithm and subsequently thereto, allocate the quantityallocated to each subset of previously received but unsatisfied ordersamong the previously received but unsatisfied orders thereof accordingto a second allocation algorithm different from the first allocationalgorithm.

Generally, the disclosed embodiments directed to allocation of anincoming order among resting orders apply to a resting order book andimplement a decay function which may lower, relative to an entirelytime-priority/FIFO based allocation, the benefit of being first to placean order, e.g., being first at a price level, as the order and/or theprice level ages on the order book without being matched. As opposed tothe hybrid allocation methodologies discussed above which either fix theapplication of a set of allocation methods or switch among methodologiesbased on the occurrence of particular conditions, the disclosedembodiments' reliance on the passage of time results in a more gracefultransition among allocation methodologies as well as permits a moredirect targeting of specific orders and price levels for controllingallocation thereto over time, e.g. may allow for an early order tomaintains priority over a much later order as opposed to a moreproximately received order. As resting orders and/or a price level ages,the resting orders may be clustered/grouped together, such as bytemporal proximity, up to a threshold limit or until all orders aregrouped together in a single grouping. When a suitably matching incomingorder is received, it is first allocated across the order groupsaccording to a first allocation algorithm, e.g., FIFO, and then thequantity allocated to each group is reallocated to the orders of thatgroup according to a second allocation algorithm, e.g., pro rata. Aswill be understood, if an incoming order matching order is received soonafter a resting order was received, the resting order may still havetime priority and will be matched first, despite the subsequent receiptof other suitable resting orders. However, as time passes without asuitable incoming order having been received, the resting order willgradually be grouped with other suitable resting orders, the degree ofgrouping increasing over time, such that when the suitable incomingorder is finally receiving, the earliest received resting order may haveto share that incoming order pro rata with other later received restingorders. Traders who place their orders first cannot lock up the orderbook due to their time priority and traders who seek pro rata allocationmay be exposed to a FIFO allocation initially, tempering theirwillingness to inflate their order quantity or otherwise “top off” theirorders by increasing their quantity after a small partial fill occurs(since doing so, in at least one embodiment herein, will deprecate theirpriority).

As incoming order allocation is really only an issue when the incomingorder quantity, or residual quantity after first satisfying a betterprice level, is less than the total quantity of the resting orders at agiven matching price level, the disclosed embodiments will be discussedspecifically with reference to the situation of an incoming order havinga quantity less than the total quantity resting at a given price level.It will be appreciated that the disclosed embodiments may be utilizedwhen the incoming quantity is greater than the total resting quantity,but the result will be the same, all orders will be filled. Furthermore,where the incoming order is first matched against a first price levelwhich is fully satisfied thereby, leaving residual quantity for matchingwith a next better price level, the disclosed embodiments may beapplicable thereto and it will be understood that reference herein thequantity of the incoming order may refer to the residual quantity afterfirst satisfying one or more better price levels.

For example, orders resting on the order book for less than 10 ms may betreated as individual groups and, upon receipt of a suitable matchingincoming order, be allocated on a time priority/FIFO basis. However, ifa suitable incoming order is not received within 10 ms, the restingorders may be grouped such as by orders having been received within 2 msof each other. However, more recently received resting orders, i.e.,younger orders, remain ungrouped, albeit, based on the FIFO allocation,prioritized behind the groups of previously resting orders. Afteranother 10 ms without a suitable incoming order, the resting orders, maybe regrouped, such s based on orders being within 4 ms of each other,effectively collecting more orders within each group and therebydiminishing the time priority value of any one order therein. This maybe a continuous process performed as an incoming order is received orbased on some other event or the elapse of time. As resting orders aresatisfied or canceled, the groups may be reevaluated based, for example,on the oldest order or on the age of the particular price level at whichorders are resting.

Effectively, this provides time decay for a particular resting orderfrom, for example, a FIFO allocation to a pro rata allocation, with boththe initial FIFO benefit and the rate of decay to pro rata being fullyconfigurable, such as market by market. By applying the disclosed decayprocess by price level, traders who better a price, i.e., are first toplace an order at a particular price, get the benefit of FIFO allocationinitially but the benefit decays reflecting the view that as timepasses, one should not be rewarded as much for being first. The rate ofdecay may be tailored so as to:

-   -   Discourage traders from placing or modifying an order for more        quantity than the trader really wants in order to secure a        larger pro-rata portion. Modifications as to quantity may cost a        trader their time priority position. The slower the decay, the        greater the penalty for losing time priority which will then        dis-incentivize traders to increase quantity as a price level        fills;    -   Discourage traders from joining a pro-rata market late with a        large size as, due to the time priority, they will be filled        last;    -   Provide the benefit of FIFO to traders who place market-turning        orders but discourage traders from stacking price levels at the        beginning of the day (or other trading period) to secure early        time priority position; or    -   Automatically handle markets which move quickly at some times of        the day, e.g. during daylight hours, and move slowly at other        times, e.g. during overnight hours. During times of quick price        movement, FIFO will be primarily used, however during times of        slow price movement, pro rata will be more likely, benefiting,        for example, traders willing to quote overnight.

In further implementations, the decay function and/or the groupingcriteria may be altered based on external or internal triggers such as:

-   -   release of economic indicators, government reports or earnings        reports, etc. Slowing the decay function around the release may        incentivize order placement prior to the release because those        orders would more likely receive a FIFO allocation; or    -   based on time of day. Use the decay function to shift between a        fully FIFO market (slow decay) and fully pro rata market (fast        decay) as necessary.

While the disclosed system for prioritizing order allocation isdiscussed separately from the embodiments discussed above relate toincoming order regulation, it will be appreciated that they may beimplemented separately or in conjunction with each other and all suchimplementations are contemplated herein. In combined implementations,the batching of incoming orders may be the basis for grouping thoseorders which get rested on the order book as time passes. It will beappreciated that where the batching is based on order arrival time, thegrouping function may similarly rely on the order arrival time forgrouping purposes without knowledge of the batching process basedthereon.

Generally, the evaluation of the decay and the subsequent grouping oforders for allocation priority is performed just prior to the processingof a suitably matching incoming order. However, it will be appreciatedthat the decay evaluation and grouping may be performed at other times,such as subsequent to the processing of suitably matching incomingorder.

In one embodiment, the quantity of the incoming order further comprisesa residual quantity thereof remaining after fully satisfying one or moreother previously received but unsatisfied orders for a transactioncounter thereto at a price better than the order price for a totalquantity of the financial instrument that is less than the quantity ofthe incoming order.

In one embodiment, the time of receipt of each of the plurality ofpreviously received but unsatisfied orders comprises a time at which theelectronic trading system determined the previously received order wasunsatisfied.

In one embodiment, the order monitor 308 is operative to determine theelapse of time as the amount of time passed since an event has occurred.For example, in one embodiment, the order monitor 308 is operative todetermine the elapse of time as the amount of time passed since theoldest of the plurality of previously received but unsatisfied orderswas received by the electronic trading system. It will be appreciatedthat basing the decay on the oldest order may cause anomalous resultswhen the oldest order is canceled or satisfied, e.g., where otherresting orders may shift from pro-rata back to FIFO and some orders failto be satisfied. It will be appreciated that the elapse of time may bedetermined based on other events such as a time of a most recent trade,etc.

Alternatively, in one embodiment, the order monitor 308 is operative todetermine the elapse of time as the amount of time passed since a firstpreviously received order for a transaction of a quantity of thefinancial instrument at the order price was determined to be unsatisfiedwhen there were no other previously received but unsatisfied orders atthe order price received prior thereto stored in the match enginememory. In particular, the elapse of time may be measured as the age ofthe price level, i.e., the amount of time since a first order was restedat the particular price level when there were previously no restingorders at that price level. In one embodiment, modification orcancelation of this first order, such as to alter its quantity, may notaffect the determined price level age. Alternatively, such amodification or cancelation may cause the price level age to bedetermined based on the next later order at that price level.Alternatively, in one embodiment, the order monitor 308 is operative todetermine the elapse of time as the amount of time passed since thefirst previously received order for a transaction of a quantity of thefinancial instrument at the order price in excess of a thresholdquantity was determined to be unsatisfied when there were no otherpreviously received but unsatisfied orders at the order price receivedprior thereto stored in the memory at all or which exceeded thethreshold quantity. By defining the decay based on the age of each pricelevel, satisfaction or cancellation of the oldest orders no longeraffects the decay and grouping computation. In one embodiment, the firstpreviously received order is no longer one of the plurality ofpreviously received orders, e.g., because it was satisfied or canceled.

In one embodiment, the elapse of time resets upon satisfaction orcancelation of all of the plurality of previously received butunsatisfied orders. In one embodiment, the elapse of time resets uponoccurrence of an event, e.g., at close of the market, interruption oftrading, etc. In one embodiment, the elapse of time resets upon thetotal quantity of the plurality of previously received but unsatisfiedorders decrease below a threshold quantity subsequent to allocation ofthe incoming order.

In one embodiment, the previously received but unsatisfied orders of asubset are all accorded a time of receipt by the electronic tradingsystem associated with the oldest previously received but unsatisfiedorder of the subset for use by the order monitor after a subsequentdetermination of an elapse of time.

In one embodiment, the division of the plurality of previously receivedbut unsatisfied orders into the at least one subset thereof is based onthe time of receipt of each of the plurality of previously received butunsatisfied orders being within a threshold of the time of receipt ofanother of the plurality of previously received but unsatisfied orders,the magnitude of the threshold being a function of the magnitude of thedetermined elapse of time, wherein those previously received butunsatisfied orders having a time of receipt within the threshold ofanother of the plurality of previously received but unsatisfied ordersare included in the same subset. This may be referred to as a “floatingbatch.”

In one embodiment, the division of the plurality of previously receivedbut unsatisfied orders is based on the time of receipt of thereofrounded up to a threshold time increment, the magnitude of the thresholdtime increment being a function of the magnitude of the determinedelapse of time, wherein those previously received but unsatisfied ordershaving a rounded time of receipt within the same threshold timeincrement are included in the same subset. This may be referred to as a“fixed batch.”

It will be appreciated that Fixed batches may be more predictable to thetrader. If they know the book population time and their time they canknow with assurance where their orders fit in. Floating batches may beless predictable since the groupings are based on a reference that couldchange over time, potentially very quickly as orders are cancelled. BothFixed and Floating batches could have edge case side effects as will beunderstood. Fixed batches could cause odd side effects if not definedproperly. Consider orders at 100, 700, 1050 ms. At time T1 the groupsare 400 ms, And the grouping is A BC At time T2 the groups are 500 msand the grouping is A B C. C loses priority as time passes without Bjoining the A group, which may be the opposite of the intended result.An example of a function that would not cause this is a doublingfunction—if the groups increase by doubling (400 to 800 rather than 400to 500). This may be defined as a rule, which may be implemented by analternative embodiment, that once two orders are combined in a prioritygroup they should never be separated; their group can combine with othergroups or add additional orders but they should never split. This maypreserve the decay property.

In one embodiment, the division of the plurality of previously receivedbut unsatisfied orders increasingly reduces differentiation of theplurality of previously received but unsatisfied orders by their time ofreceipt as the magnitude of the elapse of time increases. In oneembodiment, as the magnitude of the elapse of time increases, the numberof subsets of the plurality of previously received but unsatisfiedorders decreases. In one embodiment, the reduction of differentiationincreases continuously. In one embodiment, the reduction ofdifferentiation increases incrementally.

In one embodiment, the first allocation algorithm comprises first infirst out (“FIFO”) and the second allocation algorithm comprises prorata. In one embodiment, the first and second matching algorithms mayeach comprise a pro-rata algorithm, a first in first out (“FIFO”)algorithm, a Price Explicit Time algorithm, an Order Level Pro Rataalgorithm, an Order Level Priority Pro Rata algorithm, a PreferencePrice Explicit Time algorithm, a Preference Order Level Pro Rataalgorithm, a Preference Order Level Priority Pro Rata algorithm, aThreshold Pro-Rata algorithm, a Priority Threshold Pro-Rata algorithm, aPreference Threshold Pro-Rata algorithm, a Priority Preference ThresholdPro-Rata algorithm, a Split Price-Time Pro-Rata algorithm, orcombinations thereof

It will be appreciated that the change of the grouping criteria relativeto the elapse of time may be incremental, such as by using a look uptable which relates order/price level age, or groups thereof, toparticular grouping criteria to be applied. Alternatively, groupingcriteria may be a function of the elapse of time wherein the functionfactors in

-   -   The time the price level has had non-zero quantity    -   The time the price level has had quantity over a certain        configurable amount    -   The arrival time of all orders, specifically the oldest and        newest orders    -   The time since the last trade    -   A fixed lookup table    -   Time of day, response time of the match engine, and/or other        factors; and/or    -   combinations thereof.

In one embodiment, the grouping criteria may have a maximum upper boundsuch that no matter how much time passes, the resting orders will not befurther grouped together. In this embodiment, for example, restingorders will never fully decay to an entirely pro rata allocationmethodology. Alternatively, the grouping criteria may increasinglyprogress until all resting orders are grouped together resulting in anentirely pro rata allocation. In one embodiment, the grouping criteriamay be constant, e.g., 1 ms interorder difference or 1 ms intervalregardless of price level or oldest order age, such that FIFO isgenerally preserved except for closely spaced orders. In such anembodiment where the grouping criteria is larger, e.g., 10 seconds, prorata allocation may be generally preserved except for orders which restat a price level just prior to a trade event. It will be appreciatedthat the desired grouping criteria may depend on the characteristics ofthe particular market, e.g., volatility or frequency at which orders arereceived, and the intended goal, e.g., to favor FIFO over pro rata orvice versa, etc.

FIG. 6 depicts a flow chart showing operation of the system 300 of FIG.3 . In particular FIG. 6 shows a computer implemented method fordetermining, by an electronic trading system 100, an allocation of anincoming order for a transaction of a quantity of a financial instrumentat an order price among a plurality of previously received butunsatisfied orders, stored in a match engine memory, for a transactioncounter thereto at the order price for a total quantity of the financialinstrument that is less than the quantity of the incoming order, whereineach of the plurality of previously received but unsatisfied orders ischaracterized by a time of receipt at which the previously received butunsatisfied order was received by the electronic trading system 100.

The operation of the system 300 includes: receiving, by a match engineprocessor, the incoming order [Block 602]; determining, by the matchengine processor, an elapse of time and based on the magnitude thereof,dividing the plurality of previously received but unsatisfied ordersinto at least one non-overlapping subset thereof, each comprising atleast one of the plurality of previously received but unsatisfiedorders, as a function of the time of receipt thereof [Block 604]; andallocating, by the match engine processor, the quantity of the incomingorder to each of the at least one subset of previously received butunsatisfied orders according to a first allocation algorithm andsubsequently thereto, allocating the quantity allocated to each subsetof previously received but unsatisfied orders among the previouslyreceived but unsatisfied orders thereof according to a second allocationalgorithm different from the first allocation algorithm [Block 606].

Generally, the disclosed embodiments apply to a resting order book andimplement a decay function which lowers the benefit of being first toplace an order, e.g., being first at a price level, as the order and/orthe price level ages on the order book without being matched. As opposedto the hybrid allocation methodologies discussed above which either fixthe application of a set of allocation methods or switch amongmethodologies based on the occurrence of particular conditions, thedisclosed embodiments' reliance on the passage of time results in a moregraceful transition among allocation methodologies as well as permits amore direct targeting of specific orders and price levels forcontrolling allocation thereto over time, e.g. may allow for an earlyorder to maintain priority over a much later order as opposed to a moreproximately received order. As resting orders and/or a price level ages,the resting orders are clustered/grouped together, such as by temporalproximity. When a suitably matching incoming order is received, it isfirst allocated across the order groups according to a first allocationalgorithm, e.g., FIFO, and then the quantity allocated to each group isreallocated to the orders of that group according to a second allocationalgorithm, e.g., pro rata. As will be understood, if an incoming ordermatching order is received soon after a resting order was received, theresting order may still have time priority and will be matched first,despite the subsequent receipt of other suitable resting orders.However, as time passes without a suitable incoming order having beenreceived, the resting order will gradually be grouped with othersuitable resting orders, the degree of grouping increasing over time,such that when the suitable incoming order is finally receiving, theearliest received resting order may have to share that incoming orderpro rata with other later received resting orders. Traders who placetheir orders first cannot lock up the order book due to their timepriority and traders who seek pro rata allocation may be exposed to aFIFO allocation initially, tempering their willingness to inflate theirorder quantity.

As incoming order allocation is really only an issue when the incomingorder quantity, or residual quantity after first satisfying a betterprice level, is less than the total quantity of the resting orders at agiven matching price level, the disclosed embodiments will be discussedspecifically with reference to the situation of an incoming order havinga quantity less than the total quantity resting at a given price level.It will be appreciated that the disclosed embodiments may be utilizedwhen the incoming quantity is greater than the total resting quantity,but the result will be the same, all orders will be filled. Furthermore,where the incoming order is first matched against a first price levelwhich is fully satisfied thereby, leaving residual quantity for matchingwith a next better price level, the disclosed embodiments may beapplicable thereto and it will be understood that reference herein thequantity of the incoming order may refer to the residual quantity afterfirst satisfying one or more better price levels.

For example, orders resting on the order book for less than 10 ms may betreated as individual groups and, upon receipt of a suitable matchingincoming order, be allocated on a time priority/FIFO basis. However, ifa suitable incoming order is not received within 10 ms, the restingorders may be grouped such as by orders having been received within 2 msof each other. However, more recently received resting orders, i.e.,younger orders, remain ungrouped, albeit, based on the FIFO allocation,prioritized behind the groups of previously resting orders. Afteranother 10 ms without a suitable incoming order, the resting orders, maybe regrouped, such s based on orders being within 4 ms of each other,effectively collecting more orders within each group and therebydiminishing the time priority value of any one order therein. This maybe a continuous process performed as an incoming order is received orbased on some other event or the elapse of time. As resting orders aresatisfied or canceled, the groups may be reevaluated based, for example,on the oldest order or on the age of the particular price level at whichorders are resting.

Effectively, this provides time decay for a particular resting orderfrom, for example, a FIFO allocation to a pro rata allocation, with boththe initial FIFO benefit and the rate of decay to pro rata being fullyconfigurable, such as market by market. By applying the disclosed decayprocess by price level, traders who better a price, i.e., are first toplace an order at a particular price, get the benefit of FIFO allocationinitially but the benefit decays reflecting the view that as timepasses, one should not be rewarded as much for being first. The rate ofdecay may be tailored so as to:

-   -   Discourage traders from placing or modifying an order for more        quantity than the trader really wants in order to secure a        larger pro-rata portion. Modifications as to quantity may cost a        trader their time priority position. The slower the decay, the        greater the penalty for losing time priority which will then        dis-incentivize traders to increase quantity as a price level        fills;    -   Discourage traders from joining a pro-rata market late with a        large size as, due to the time priority, they will be filled        last;    -   Provide the benefit of FIFO to traders who place market-turning        orders but discourage traders from stacking price levels at the        beginning of the day (or other trading period) to secure early        time priority position; or    -   Automatically handle markets which move quickly at some times of        the day, e.g. during daylight hours, and move slowly at other        times, e.g. during overnight hours. During times of quick price        movement, FIFO will be primarily used, however during times of        slow price movement, pro rata will be more likely, benefiting,        for example, traders willing to quote overnight.

In further implementations, the decay function and/or the groupingcriteria may be altered based on external or internal triggers such as:

-   -   release of economic indicators, government reports or earnings        reports, etc. Slowing the decay function around the release may        incentivize order placement prior to the release because those        orders would more likely receive a FIFO allocation; or    -   based on time of day. Use the decay function to shift between a        fully FIFO market (slow decay) and fully pro rata market (fast        decay) as necessary.

While the disclosed system for prioritizing order allocation isdiscussed separately from the embodiments discussed above relate toincoming order regulation, it will be appreciated that they may beimplemented separately or in conjunction with each other and all suchimplementations are contemplated herein. In combined implementations,the batching of incoming orders may be the basis for grouping thoseorders which get rested on the order book as time passes. It will beappreciated that where the batching is based on order arrival time, thegrouping function may similarly rely on the order arrival time forgrouping purposes without knowledge of the batching process basedthereon.

Generally, the evaluation of the decay and the subsequent grouping oforders for allocation priority is performed just prior to the processingof a suitably matching incoming order. However, it will be appreciatedthat the decay evaluation and grouping may be performed at other times,such as subsequent to the processing of suitably matching incomingorder.

In one embodiment, the quantity of the incoming order further comprisesa residual quantity thereof remaining after fully satisfying one or moreother previously received but unsatisfied orders for a transactioncounter thereto at a price better than the order price for a totalquantity of the financial instrument that is less than the quantity ofthe incoming order.

In one embodiment, the time of receipt of each of the plurality ofpreviously received but unsatisfied orders comprises a time at which theelectronic trading system determined the previously received order wasunsatisfied.

In one embodiment, the determining further comprises determining theelapse of time as the amount of time passed since an event has occurred.For example, in one embodiment, the elapse of time is determined as theamount of time passed since the oldest of the plurality of previouslyreceived but unsatisfied orders was received by the electronic tradingsystem. It will be appreciated that basing the decay on the oldest ordermay cause anomalous results when the oldest order is canceled orsatisfied, e.g., where other resting orders may shift from pro-rata backto FIFO and some orders fail to be satisfied. It will be appreciatedthat the elapse of time may be determined based on other events such asa time of a most recent trade, etc.

In one embodiment, the elapse of time is determined as the amount oftime passed since a first previously received order for a transaction ofa quantity of the financial instrument at the order price was determinedto be unsatisfied when there were no other previously received butunsatisfied orders at the order price received prior thereto stored inthe memory. In particular, the elapse of time may be measured as the ageof the price level, i.e., the amount of time since a first order wasrested at the particular price level when there were previously noresting orders at that price level. In one embodiment, modification orcancelation of this first order, such as to alter its quantity, may notaffect the determined price level age. Alternatively, such amodification or cancelation may cause the price level age to bedetermined based on the next later order at that price level.Alternatively, in one embodiment, the elapse of time is determined asthe amount of time passed since the first previously received order fora transaction of a quantity of the financial instrument at the orderprice in excess of a threshold quantity was determined to be unsatisfiedwhen there were no other previously received but unsatisfied orders atthe order price received prior thereto stored in the memory at all orwhich exceeded the threshold quantity. By defining the decay based onthe age of each price level, satisfaction or cancellation of the oldestorders no longer affects the decay and grouping computation. In oneembodiment, the first previously received order is no longer one of theplurality of previously received orders, e.g., because it was satisfiedor canceled.

In one embodiment, the elapse of time resets upon satisfaction orcancelation of all of the plurality of previously received butunsatisfied orders. In one embodiment, the elapse of time resets uponoccurrence of an event, e.g., at close of the market, interruption oftrading, etc. In one embodiment, the elapse of time resets upon thetotal quantity of the plurality of previously received but unsatisfiedorders decrease below a threshold quantity subsequent to allocation ofthe incoming order.

In one embodiment, the previously received but unsatisfied orders of asubset are all accorded a time of receipt by the electronic tradingsystem associated with the oldest previously received but unsatisfiedorder of the subset for use by the order monitor after a subsequentdetermination of an elapse of time.

In one embodiment, the division of the plurality of previously receivedbut unsatisfied orders into the at least one subset thereof is based onthe time of receipt of each of the plurality of previously received butunsatisfied orders being within a threshold of the time of receipt ofanother of the plurality of previously received but unsatisfied orders,the magnitude of the threshold being a function of the magnitude of thedetermined elapse of time, wherein those previously received butunsatisfied orders having a time of receipt within the threshold ofanother of the plurality of previously received but unsatisfied ordersare included in the same subset. This may be referred to as a “floatingbatch.”

In one embodiment, the division of the plurality of previously receivedbut unsatisfied orders is based on the time of receipt of thereofrounded up to a threshold time increment, the magnitude of the thresholdtime increment being a function of the magnitude of the determinedelapse of time, wherein those previously received but unsatisfied ordershaving a rounded time of receipt within the same threshold timeincrement are included in the same subset. This may be referred to as a“fixed batch.”

It will be appreciated that Fixed batches may be more predictable to thetrader. If they know the book population time and their time they canknow with assurance where their orders fit in. Floating batches may beless predictable since the groupings are based on a reference that couldchange over time, potentially very quickly as orders are cancelled. BothFixed and Floating batches could have edge case side effects as will beunderstood. Fixed batches could cause odd side effects if not definedproperly. Consider orders at 100, 700, 1050 ms. At time T1 the groupsare 400 ms, And the grouping is A BC At time T2 the groups are 500 msand the grouping is A B C. C loses priority as time passes without Bjoining the A group, which may be the opposite of the intended result.An example of a function that would not cause this is a doublingfunction—if the groups increase by doubling (400 to 800 rather than 400to 500). This may be defined as a rule, which may be implemented by analternative embodiment, that once two orders are combined in a prioritygroup they should never be separated; their group can combine with othergroups or add additional orders but they should never split. This maypreserve the decay property.

In one embodiment, the division of the plurality of previously receivedbut unsatisfied orders increasingly reduces differentiation of theplurality of previously received but unsatisfied orders by their time ofreceipt as the magnitude of the elapse of time increases. In oneembodiment, as the magnitude of the elapse of time increases, the numberof subsets of the plurality of previously received but unsatisfiedorders decreases. In one embodiment, the reduction of differentiationincreases continuously. In one embodiment, the reduction ofdifferentiation increases incrementally.

In one embodiment, the first allocation algorithm comprises first infirst out (“FIFO”) and the second allocation algorithm comprises prorata. In one embodiment, the first and second matching algorithms mayeach comprise a pro-rata algorithm, a first in first out (“FIFO”)algorithm, a Price Explicit Time algorithm, an Order Level Pro Rataalgorithm, an Order Level Priority Pro Rata algorithm, a PreferencePrice Explicit Time algorithm, a Preference Order Level Pro Rataalgorithm, a Preference Order Level Priority Pro Rata algorithm, aThreshold Pro-Rata algorithm, a Priority Threshold Pro-Rata algorithm, aPreference Threshold Pro-Rata algorithm, a Priority Preference ThresholdPro-Rata algorithm, a Split Price-Time Pro-Rata algorithm, orcombinations thereof

It will be appreciated that the change of the grouping criteria relativeto the elapse of time may be incremental, such as by using a look uptable which relates order/price level age, or groups thereof, toparticular grouping criteria to be applied. Alternatively, groupingcriteria may be a function of the elapse of time wherein the functionfactors in

-   -   The time the price level has had non-zero quantity    -   The time the price level has had quantity over a certain        configurable amount    -   The arrival time of all orders, specifically the oldest and        newest orders    -   The time since the last trade    -   A fixed lookup table    -   Time of day, response time of the match engine, and/or other        factors; and/or    -   combinations thereof.

In one embodiment, the grouping criteria may have a maximum upper boundsuch that no matter how much time passes, the resting orders will not befurther grouped together. In this embodiment, for example, restingorders will never fully decay to an entirely pro rata allocationmethodology. Alternatively, the grouping criteria may increasinglyprogress until all resting orders are grouped together resulting in anentirely pro rata allocation. In one embodiment, the grouping criteriamay be constant, e.g., 1 ms, such that FIFO is generally preservedexcept for closely spaced orders.

FIGS. 7A-C show exemplary operation of the disclosed embodiments forprioritizing incoming order allocation to resting orders. FIG. 7A, inparticular, shows how the resting orders group together based on thedefined decay rule/grouping criteria depending on how long it takes forincoming order X to be received, i.e., at T+1, T+2, T+3 or T+4. In thisexample, grouping is based on the oldest resting order. FIG. 7B shows anexample operation of the disclosed embodiments considering the case ofthe oldest order being filled and the grouping criteria then changingbased on the next oldest order, which may be similar to the scenariowhere the oldest order was instead canceled, i.e., that the oldest orderwas removed from the resting book. In this example, the allocation ofthe incoming order is demonstrated as a function of when it wasreceived, i.e., at T+1, T+2, T+3 or T+4. The case of T+1 seconds iseffectively FIFO, as in the example of FIG. 7A. At T+2 seconds, theinitial grouping of [A B] is fully filled. The new “oldest restingorder” is C, which is 1400 ms old. By the rule in the lookup table, wegroup orders by 250 milliseconds, which puts C and D in the same group.Quantity is assigned pro-rata, with D getting 133 rounded up. At T+3seconds, the initial grouping becomes [A B C]. The quantity of theincoming order is not enough to fully satisfy, so no second round isdone.

From the perspective of the trader of order D this result may seemanomalous, that the same trade that happens a second apart shuts themout—it doesn't decay smoothly from FIFO to pro-rata. It does start atFIFO and end at pro-rata, but there is a possible disconnect in themiddle where the order goes from getting filled to not getting filledand then back.

FIG. 7C shows an example using the “time the price level had more thanzero quantity” as the peg time rather than the time of the oldestresting order. In particular, once a trader creates the price level byputting an order on it, that time is kept as the oldest time for theprice level until the price level is fully eliminated, which couldhappen either by order cancellation, trading out, or market close. Thiseffectively shifts the algorithm to pro-rata in markets that have slowprice movement. As an alternative, the mechanism could be based on thetime the price level went above a defined/configurable quantity whichwould prevent someone from putting a 1 lot out on a market early just toforce it to be pro-rata when they finally wanted to trade. As will beseen in the example of FIG. 7C, In this case four algorithms are beingcompared at a single point in time (T+1 seconds). There are twoimmediately consecutive arriving orders, one for 500 and one for 100.That results in two distinct allocations (the columns), resulting in atotal allocation for each resting order (The total allocation column).There's also a column called “Single order?”, which shows the allocationif a single 600 lot order came in instead of a 500 lot immediatelyfollowed by a 100 lot.

It can be seen that when pegged to the oldest order, the resultingallocation is different when 600 quantity arrives as (500,100) ratherthan (600). This may be undesirable, as it may lessen the predictabilityof the market.

This happens because when the decay tied to the oldest order, theremoval of orders A, B from the book (in this case via trade) moves thebatch from 500 ms down to 10 ms. That re-splits orders C, D intodifferent batches, regardless of which, fixed or floating approach istaken to batching. By pegging to the inception time of the price levelthis effect is removed and more consistent behavior is achieved. If atany point the quantity on the price level goes from zero to non-zeroquantity (or from below the threshold to above the threshold, ifconfigured that way), a new inception value is set. This would likely becommunicated to the marketplace either via explicit message, or viaimplicit rule by the timestamp when the market data book shows a certainquantity.

FIG. 7D shows exemplary variations of the operation of the disclosedembodiments as compared with singular allocation methods, i.e., all FIFOor all pro rata, and compared with a non-temporal hybrid methodology.

Referring to FIG. 4 , an illustrative embodiment of a general computersystem 400 is shown. The computer system 400 can include a set ofinstructions that can be executed to cause the computer system 400 toperform any one or more of the methods or computer-based functionsdisclosed herein. The computer system 400 may operate as a standalonedevice or may be connected, e.g., using a network, to other computersystems or peripheral devices. Any of the components or modulesdiscussed above, such as the processors 202 and 302, may be a computersystem 400 or a component in the computer system 400. The computersystem 400 may implement a match engine, margin processing, payment orclearing function on behalf of an exchange, such as the ChicagoMercantile Exchange, of which the disclosed embodiments are a componentthereof.

In a networked deployment, the computer system 400 may operate in thecapacity of a server or as a client user computer in a client-serveruser network environment, or as a peer computer system in a peer-to-peer(or distributed) network environment. The computer system 400 can alsobe implemented as or incorporated into various devices, such as apersonal computer (PC), a tablet PC, a set-top box (STB), a personaldigital assistant (PDA), a mobile device, a palmtop computer, a laptopcomputer, a desktop computer, a communications device, a wirelesstelephone, a land-line telephone, a control system, a camera, a scanner,a facsimile machine, a printer, a pager, a personal trusted device, aweb appliance, a network router, switch or bridge, or any other machinecapable of executing a set of instructions (sequential or otherwise)that specify actions to be taken by that machine. In a particularembodiment, the computer system 400 can be implemented using electronicdevices that provide voice, video or data communication. Further, whilea single computer system 400 is illustrated, the term “system” shallalso be taken to include any collection of systems or sub-systems thatindividually or jointly execute a set, or multiple sets, of instructionsto perform one or more computer functions.

As illustrated in FIG. 4 , the computer system 400 may include aprocessor 402, e.g., a central processing unit (CPU), a graphicsprocessing unit (GPU), or both. The processor 402 may be a component ina variety of systems. For example, the processor 402 may be part of astandard personal computer or a workstation. The processor 402 may beone or more general processors, digital signal processors, applicationspecific integrated circuits, field programmable gate arrays, servers,networks, digital circuits, analog circuits, combinations thereof, orother now known or later developed devices for analyzing and processingdata. The processor 402 may implement a software program, such as codegenerated manually (i.e., programmed).

The computer system 400 may include a memory 404 that can communicatevia a bus 408. The memory 404 may be a main memory, a static memory, ora dynamic memory. The memory 404 may include but is not limited tocomputer readable storage media such as various types of volatile andnon-volatile storage media, including but not limited to random accessmemory, read-only memory, programmable read-only memory, electricallyprogrammable read-only memory, electrically erasable read-only memory,flash memory, magnetic tape or disk, optical media and the like. In oneembodiment, the memory 404 includes a cache or random access memory forthe processor 402. In alternative embodiments, the memory 404 isseparate from the processor 402, such as a cache memory of a processor,the system memory, or other memory. The memory 404 may be an externalstorage device or database for storing data. Examples include a harddrive, compact disc (“CD”), digital video disc (“DVD”), memory card,memory stick, floppy disc, universal serial bus (“USB”) memory device,or any other device operative to store data. The memory 404 is operableto store instructions executable by the processor 402. The functions,acts or tasks illustrated in the figures or described herein may beperformed by the programmed processor 402 executing the instructions 412stored in the memory 404. The functions, acts or tasks are independentof the particular type of instructions set, storage media, processor orprocessing strategy and may be performed by software, hardware,integrated circuits, firm-ware, micro-code and the like, operating aloneor in combination. Likewise, processing strategies may includemultiprocessing, multitasking, parallel processing and the like.

As shown, the computer system 400 may further include a display unit414, such as a liquid crystal display (LCD), an organic light emittingdiode (OLED), a flat panel display, a solid state display, a cathode raytube (CRT), a projector, a printer or other now known or later developeddisplay device for outputting determined information. The display 414may act as an interface for the user to see the functioning of theprocessor 402, or specifically as an interface with the software storedin the memory 404 or in the drive unit 406.

Additionally, the computer system 400 may include an input device 416configured to allow a user to interact with any of the components ofsystem 400. The input device 416 may be a number pad, a keyboard, or acursor control device, such as a mouse, or a joystick, touch screendisplay, remote control or any other device operative to interact withthe system 400.

In a particular embodiment, as depicted in FIG. 4 , the computer system400 may also include a disk or optical drive unit 406. The disk driveunit 406 may include a computer-readable medium 410 in which one or moresets of instructions 412, e.g., software, can be embedded. Further, theinstructions 412 may embody one or more of the methods or logic asdescribed herein. In a particular embodiment, the instructions 412 mayreside completely, or at least partially, within the memory 404 and/orwithin the processor 402 during execution by the computer system 400.The memory 404 and the processor 402 also may include computer-readablemedia as discussed above.

The present disclosure contemplates a computer-readable medium thatincludes instructions 412 or receives and executes instructions 412responsive to a propagated signal, so that a device connected to anetwork 420 can communicate voice, video, audio, images or any otherdata over the network 420. Further, the instructions 412 may betransmitted or received over the network 420 via a communicationinterface 418. The communication interface 418 may be a part of theprocessor 402 or may be a separate component. The communicationinterface 418 may be created in software or may be a physical connectionin hardware. The communication interface 418 is configured to connectwith a network 420, external media, the display 414, or any othercomponents in system 400, or combinations thereof. The connection withthe network 420 may be a physical connection, such as a wired Ethernetconnection or may be established wirelessly as discussed below.Likewise, the additional connections with other components of the system400 may be physical connections or may be established wirelessly.

The network 420 may include wired networks, wireless networks, orcombinations thereof. The wireless network may be a cellular telephonenetwork, an 802.11, 802.16, 802.20, or WiMax network. Further, thenetwork 420 may be a public network, such as the Internet, a privatenetwork, such as an intranet, or combinations thereof, and may utilize avariety of networking protocols now available or later developedincluding, but not limited to TCP/IP based networking protocols.

Embodiments of the subject matter and the functional operationsdescribed in this specification can be implemented in digital electroniccircuitry, or in computer software, firmware, or hardware, including thestructures disclosed in this specification and their structuralequivalents, or in combinations of one or more of them. Embodiments ofthe subject matter described in this specification can be implemented asone or more computer program products, i.e., one or more modules ofcomputer program instructions encoded on a computer readable medium forexecution by, or to control the operation of, data processing apparatus.While the computer-readable medium is shown to be a single medium, theterm “computer-readable medium” includes a single medium or multiplemedia, such as a centralized or distributed database, and/or associatedcaches and servers that store one or more sets of instructions. The term“computer-readable medium” shall also include any medium that is capableof storing, encoding or carrying a set of instructions for execution bya processor or that cause a computer system to perform any one or moreof the methods or operations disclosed herein. The computer readablemedium can be a machine-readable storage device, a machine-readablestorage substrate, a memory device, or a combination of one or more ofthem. The term “data processing apparatus” encompasses all apparatus,devices, and machines for processing data, including by way of example aprogrammable processor, a computer, or multiple processors or computers.The apparatus can include, in addition to hardware, code that creates anexecution environment for the computer program in question, e.g., codethat constitutes processor firmware, a protocol stack, a databasemanagement system, an operating system, or a combination of one or moreof them.

In a particular non-limiting, exemplary embodiment, thecomputer-readable medium can include a solid-state memory such as amemory card or other package that houses one or more non-volatileread-only memories. Further, the computer-readable medium can be arandom access memory or other volatile re-writable memory. Additionally,the computer-readable medium can include a magneto-optical or opticalmedium, such as a disk or tapes or other storage device to capturecarrier wave signals such as a signal communicated over a transmissionmedium. A digital file attachment to an e-mail or other self-containedinformation archive or set of archives may be considered a distributionmedium that is a tangible storage medium. Accordingly, the disclosure isconsidered to include any one or more of a computer-readable medium or adistribution medium and other equivalents and successor media, in whichdata or instructions may be stored.

In an alternative embodiment, dedicated hardware implementations, suchas application specific integrated circuits, programmable logic arraysand other hardware devices, can be constructed to implement one or moreof the methods described herein. Applications that may include theapparatus and systems of various embodiments can broadly include avariety of electronic and computer systems. One or more embodimentsdescribed herein may implement functions using two or more specificinterconnected hardware modules or devices with related control and datasignals that can be communicated between and through the modules, or asportions of an application-specific integrated circuit. Accordingly, thepresent system encompasses software, firmware, and hardwareimplementations.

In accordance with various embodiments of the present disclosure, themethods described herein may be implemented by software programsexecutable by a computer system. Further, in an exemplary, non-limitedembodiment, implementations can include distributed processing,component/object distributed processing, and parallel processing.Alternatively, virtual computer system processing can be constructed toimplement one or more of the methods or functionality as describedherein.

Although the present specification describes components and functionsthat may be implemented in particular embodiments with reference toparticular standards and protocols, the invention is not limited to suchstandards and protocols. For example, standards for Internet and otherpacket switched network transmission (e.g., TCP/IP, UDP/IP, HTML, HTTP,HTTPS) represent examples of the state of the art. Such standards areperiodically superseded by faster or more efficient equivalents havingessentially the same functions. Accordingly, replacement standards andprotocols having the same or similar functions as those disclosed hereinare considered equivalents thereof.

A computer program (also known as a program, software, softwareapplication, script, or code) can be written in any form of programminglanguage, including compiled or interpreted languages, and it can bedeployed in any form, including as a standalone program or as a module,component, subroutine, or other unit suitable for use in a computingenvironment. A computer program does not necessarily correspond to afile in a file system. A program can be stored in a portion of a filethat holds other programs or data (e.g., one or more scripts stored in amarkup language document), in a single file dedicated to the program inquestion, or in multiple coordinated files (e.g., files that store oneor more modules, sub programs, or portions of code). A computer programcan be deployed to be executed on one computer or on multiple computersthat are located at one site or distributed across multiple sites andinterconnected by a communication network.

The processes and logic flows described in this specification can beperformed by one or more programmable processors executing one or morecomputer programs to perform functions by operating on input data andgenerating output. The processes and logic flows can also be performedby, and apparatus can also be implemented as, special purpose logiccircuitry, e.g., an FPGA (field programmable gate array) or an ASIC(application specific integrated circuit).

Processors suitable for the execution of a computer program include, byway of example, both general and special purpose microprocessors, andanyone or more processors of any kind of digital computer. Generally, aprocessor will receive instructions and data from a read only memory ora random access memory or both. The essential elements of a computer area processor for performing instructions and one or more memory devicesfor storing instructions and data. Generally, a computer will alsoinclude, or be operatively coupled to receive data from or transfer datato, or both, one or more mass storage devices for storing data, e.g.,magnetic, magneto optical disks, or optical disks. However, a computerneed not have such devices. Moreover, a computer can be embedded inanother device, e.g., a mobile telephone, a personal digital assistant(PDA), a mobile audio player, a Global Positioning System (GPS)receiver, to name just a few. Computer readable media suitable forstoring computer program instructions and data include all forms ofnonvolatile memory, media and memory devices, including by way ofexample semiconductor memory devices, e.g., EPROM, EEPROM, and flashmemory devices; magnetic disks, e.g., internal hard disks or removabledisks; magneto optical disks; and CD ROM and DVD-ROM disks. Theprocessor and the memory can be supplemented by, or incorporated in,special purpose logic circuitry.

To provide for interaction with a user, embodiments of the subjectmatter described in this specification can be implemented on a devicehaving a display, e.g., a CRT (cathode ray tube) or LCD (liquid crystaldisplay) monitor, for displaying information to the user and a keyboardand a pointing device, e.g., a mouse or a trackball, by which the usercan provide input to the computer. Other kinds of devices can be used toprovide for interaction with a user as well; for example, feedbackprovided to the user can be any form of sensory feedback, e.g., visualfeedback, auditory feedback, or tactile feedback; and input from theuser can be received in any form, including acoustic, speech, or tactileinput.

Embodiments of the subject matter described in this specification can beimplemented in a computing system that includes a back end component,e.g., as a data server, or that includes a middleware component, e.g.,an application server, or that includes a front end component, e.g., aclient computer having a graphical user interface or a Web browserthrough which a user can interact with an implementation of the subjectmatter described in this specification, or any combination of one ormore such back end, middleware, or front end components. The componentsof the system can be interconnected by any form or medium of digitaldata communication, e.g., a communication network. Examples ofcommunication networks include a local area network (“LAN”) and a widearea network (“WAN”), e.g., the Internet.

The computing system can include clients and servers. A client andserver are generally remote from each other and typically interactthrough a communication network. The relationship of client and serverarises by virtue of computer programs running on the respectivecomputers and having a client-server relationship to each other.

The illustrations of the embodiments described herein are intended toprovide a general understanding of the structure of the variousembodiments. The illustrations are not intended to serve as a completedescription of all of the elements and features of apparatus and systemsthat utilize the structures or methods described herein. Many otherembodiments may be apparent to those of skill in the art upon reviewingthe disclosure. Other embodiments may be utilized and derived from thedisclosure, such that structural and logical substitutions and changesmay be made without departing from the scope of the disclosure.Additionally, the illustrations are merely representational and may notbe drawn to scale. Certain proportions within the illustrations may beexaggerated, while other proportions may be minimized. Accordingly, thedisclosure and the figures are to be regarded as illustrative ratherthan restrictive.

While this specification contains many specifics, these should not beconstrued as limitations on the scope of the invention or of what may beclaimed, but rather as descriptions of features specific to particularembodiments of the invention. Certain features that are described inthis specification in the context of separate embodiments can also beimplemented in combination in a single embodiment. Conversely, variousfeatures that are described in the context of a single embodiment canalso be implemented in multiple embodiments separately or in anysuitable sub-combination. Moreover, although features may be describedabove as acting in certain combinations and even initially claimed assuch, one or more features from a claimed combination can in some casesbe excised from the combination, and the claimed combination may bedirected to a sub-combination or variation of a sub-combination.

Similarly, while operations are depicted in the drawings and describedherein in a particular order, this should not be understood as requiringthat such operations be performed in the particular order shown or insequential order, or that all illustrated operations be performed, toachieve desirable results. In certain circumstances, multitasking andparallel processing may be advantageous. Moreover, the separation ofvarious system components in the embodiments described above should notbe understood as requiring such separation in all embodiments, and itshould be understood that the described program components and systemscan generally be integrated together in a single software product orpackaged into multiple software products.

One or more embodiments of the disclosure may be referred to herein,individually and/or collectively, by the term “invention” merely forconvenience and without intending to voluntarily limit the scope of thisapplication to any particular invention or inventive concept. Moreover,although specific embodiments have been illustrated and describedherein, it should be appreciated that any subsequent arrangementdesigned to achieve the same or similar purpose may be substituted forthe specific embodiments shown. This disclosure is intended to cover anyand all subsequent adaptations or variations of various embodiments.Combinations of the above embodiments, and other embodiments notspecifically described herein, will be apparent to those of skill in theart upon reviewing the description.

The Abstract of the Disclosure is provided to comply with 37 C.F.R. §1.72(b) and is submitted with the understanding that it will not be usedto interpret or limit the scope or meaning of the claims. In addition,in the foregoing Detailed Description, various features may be groupedtogether or described in a single embodiment for the purpose ofstreamlining the disclosure. This disclosure is not to be interpreted asreflecting an intention that the claimed embodiments require morefeatures than are expressly recited in each claim. Rather, as thefollowing claims reflect, inventive subject matter may be directed toless than all of the features of any of the disclosed embodiments. Thus,the following claims are incorporated into the Detailed Description,with each claim standing on its own as defining separately claimedsubject matter.

It is therefore intended that the foregoing detailed description beregarded as illustrative rather than limiting, and that it be understoodthat it is the following claims, including all equivalents, that areintended to define the spirit and scope of this invention.

What is claimed is:
 1. A system comprising: an incoming order processoroperative to receive, prior to a match engine processor of an electronictrading system, an incoming order of a plurality of incoming orders fora transaction of a quantity of a financial instrument at an order priceand store the received incoming order in an incoming order buffer memorycoupled with the incoming order receiver, wherein the match engineprocessor is characterized by a processing resource capacity and isoperative to attempt to match the incoming order with a plurality ofpreviously received but unsatisfied order, wherein each of the pluralityof previously received but unsatisfied orders is characterized by a timeof receipt at which each previously received but unsatisfied order wasreceived by the incoming order processor; an interval order processorcoupled with the incoming order processor and the match engineprocessor, the interval order processor operative to determine anoccurrence of an event, wherein the event comprises a feedback signalindicative of available processing resource capacity of the matchengine, wherein the feedback signal indicative of available processingresource capacity of the match engine regulates the electronic tradingsystem to process the plurality of incoming orders according toavailable processing resource capacity of the match engine by regulatingthe incoming flow of the plurality of incoming orders relative toavailable processing resource capacity of the match engine; and an orderforwarder processor coupled with the interval order processor and thematch engine processor, the order forwarder processor operative to, uponthe occurrence of the event, forward at least a subset of the storedreceived incoming orders to the match engine processor.
 2. The system ofclaim 1, wherein the event further comprises one of an elapse of aninterval of time, receipt of an acknowledgement from the match engineacknowledging receipt of previously forwarded incoming orders, or wherea number of stored received incoming orders exceeds a threshold.
 3. Thesystem of claim 1, wherein the quantity of the incoming order furthercomprises a residual quantity thereof remaining after fully satisfyingone or more other previously received but unsatisfied orders for atransaction counter thereto at a price better than the order price for atotal quantity of the financial instrument that is less than thequantity of each of the received subset of the stored incoming orders.4. The system of claim 1, wherein the time of receipt of each of theplurality of previously received but unsatisfied orders comprises a timeat which the electronic trading system determined the previouslyreceived order was unsatisfied.
 5. The system of claim 1, furthercomprising: a match engine memory coupled with the match engineprocessor, wherein the match engine processor is further configured toreceive and store the forwarded subset of the stored incoming ordersfrom the order forwarder processor in the match engine memory.
 6. Thesystem of claim 5, wherein the match engine processor is furtheroperative to: determine an elapse of time; rearrange, based on amagnitude of the elapse of time, the plurality of previously receivedbut unsatisfied orders into at least one non-overlapping subset thereof,each comprising at least one of the plurality of previously received butunsatisfied orders, as a function of the time of receipt thereof;identify one or more suitable orders of the previously received butunsatisfied orders to which to allocate the quantity of each of thereceived subset of the stored incoming orders; and allocate the quantityof each of the received subset of the stored incoming orders to at leastone of the identified suitable previously received but unsatisfiedorders according to a first allocation algorithm and subsequentlythereto, allocate the quantity allocated to each subset of previouslyreceived but unsatisfied orders for further allocation among theidentified suitable previously received but unsatisfied orders thereofaccording to a second allocation algorithm different from the firstallocation algorithm.
 7. The system of claim 6, wherein the firstallocation algorithm comprises first in first out (“FIFO”) and thesecond allocation algorithm comprises pro rata.
 8. The system of claim6, wherein the match engine processor is operative to determine theelapse of time as the amount of time passed since an event has occurred.9. The system of claim 6, wherein the match engine processor isoperative to determine the elapse of time as the amount of time passedsince the oldest of the plurality of previously received but unsatisfiedorders was received by the electronic trading system.
 10. The system ofclaim 6, wherein the match engine processor is operative to determinethe elapse of time as the amount of time passed since a first previouslyreceived order for a transaction of a quantity of the financialinstrument at the order price was determined to be unsatisfied whenthere were no other previously received but unsatisfied orders at theorder price received prior thereto stored in the match engine memory.11. The system of claim 10, wherein the match engine processor isoperative to determine the elapse of time as the amount of time passedsince the first previously received order for a transaction of aquantity of the financial instrument at the order price in excess of athreshold quantity was determined to be unsatisfied when there were noother previously received but unsatisfied orders at the order pricereceived prior thereto stored in the match engine memory.
 12. The systemof claim 6, wherein the match engine processor is operative to reset theelapse of time upon satisfaction or cancelation of all of the pluralityof previously received but unsatisfied orders.
 13. The system of claim6, wherein the previously received but unsatisfied orders of a subsetare all accorded a time of receipt by the electronic trading systemassociated with the oldest previously received but unsatisfied order ofthe subset for use by the match engine processor after a subsequentdetermination of an elapse of time.
 14. The system of claim 6, whereinan arrangement of the plurality of previously received but unsatisfiedorders is based on the time of receipt of thereof rounded up to athreshold time increment, the magnitude of the threshold time incrementbeing a function of the magnitude of the determined elapse of time,wherein those previously received but unsatisfied orders having arounded time of receipt within the same threshold time increment areincluded in the same subset.
 15. The system of claim 6, wherein anarrangement of the plurality of previously received but unsatisfiedorders increasingly reduce differentiation of the plurality ofpreviously received but unsatisfied orders by their time of receipt asthe magnitude of the elapse of time increases.
 16. The system of claim15, wherein as the magnitude of the elapse of time increases, the numberof subsets of the plurality of previously received but unsatisfiedorders decreases.
 17. A computer implemented method comprising:receiving, by an incoming order processor, prior to a match engineprocessor of an electronic trading system, an incoming order of aplurality of incoming orders for a transaction of a quantity of afinancial instrument at an order price, wherein the match engineprocessor is characterized by a processing resource capacity and isoperative to attempt to match the incoming order with a plurality ofpreviously received but unsatisfied orders, wherein each of theplurality of previously received but unsatisfied orders is characterizedby a time of receipt at which each previously received but unsatisfiedorder was received by the incoming order processor; storing, by theincoming order processor, the received incoming order in an incomingorder buffer memory; determining, by an interval order processor, anoccurrence of an event, wherein the event comprises a feedback signalindicative of available processing resource capacity of the match engineprocessor, wherein the feedback signal indicative of availableprocessing resource capacity of the match engine processor regulates theelectronic trading system to process the plurality of incoming ordersaccording to available processing resource capacity of the match engineprocessor by regulating the incoming flow of the plurality of incomingorders relative to available processing resource capacity of the matchengine processor; and forwarding, by an order forwarder processor, uponthe occurrence of the event, at least a subset of the stored receivedincoming orders to the match engine processor.
 18. The computerimplemented method of claim 17, wherein the event further comprises oneof an elapse of an interval of time, receipt of an acknowledgement fromthe match engine processor acknowledging receipt of previously forwardedincoming orders, or where the number of stored received incoming ordersexceeds a threshold.
 19. The computer implemented method of claim 17,wherein the quantity of the incoming order further comprises a residualquantity thereof remaining after fully satisfying one or more otherpreviously received but unsatisfied orders for a transaction counterthereto at a price better than the order price for a total quantity ofthe financial instrument that is less than the quantity of each of thereceived subset of the stored incoming orders.
 20. The computerimplemented method of claim 17, wherein the time of receipt of each ofthe plurality of previously received but unsatisfied orders comprises atime at which the electronic trading system determined the previouslyreceived order was unsatisfied.
 21. The computer implemented method ofclaim 17, further comprising: receiving and storing, by the match engineprocessor, the forwarded subset of the stored incoming orders from theorder forwarder processor in a match engine memory.
 22. The computerimplemented method of claim 21, further comprising: determining, by thematch engine processor, an elapse of time; rearranging, by the matchengine processor, based on a magnitude of the elapse of time, theplurality of previously received but unsatisfied orders into at leastone non-overlapping subset thereof, each comprising at least one of theplurality of previously received but unsatisfied orders, as a functionof the time of receipt thereof; identifying, by the match engineprocessor, one or more suitable orders of the previously received butunsatisfied orders to which to allocate the quantity of each of thereceived subset of the stored incoming orders; and allocating, by thematch engine processor, the quantity of each of the received subset ofthe stored incoming orders to at least one of the identified suitablepreviously received but unsatisfied orders according to a firstallocation algorithm and subsequently thereto, allocating the quantityallocated to each subset of records for further allocation among theidentified suitable previously received but unsatisfied orders storedtherein according to a second allocation algorithm.
 23. The computerimplemented method of claim 22, wherein the first allocation algorithmcomprises first in first out (“FIFO”) and the second allocationalgorithm comprises pro rata.
 24. The computer implemented method ofclaim 22, wherein the determining further comprises determining theelapse of time as the amount of time passed since the event hasoccurred.
 25. The computer implemented method of claim 22, wherein thedetermining further comprises determining the elapse of time as theamount of time passed since the oldest of the plurality of previouslyreceived but unsatisfied orders was received by the electronic tradingsystem.
 26. The computer implemented method of claim 22, wherein thedetermining further comprises determining the elapse of time as theamount of time passed since a first previously received order for atransaction of a quantity of the financial instrument at the order pricewas determined to be unsatisfied when there were no other previouslyreceived but unsatisfied orders at the order price received priorthereto stored in the match engine memory.
 27. The computer implementedmethod of claim 26, wherein the determining further comprisesdetermining the elapse of time as the amount of time passed since thefirst previously received order for a transaction of a quantity of thefinancial instrument at the order price in excess of a thresholdquantity was determined to be unsatisfied when there were no otherpreviously received but unsatisfied orders at the order price receivedprior thereto stored in the match engine memory.
 28. The computerimplemented method of claim 22, wherein the elapse of time resets uponsatisfaction or cancelation of all of the plurality of previouslyreceived but unsatisfied orders.
 29. The computer implemented method ofclaim 22, wherein the previously received but unsatisfied orders of asubset are all accorded a time of receipt associated with the oldestpreviously received but unsatisfied order of the subset for use by thematch engine processor after a subsequent determination of an elapse oftime.
 30. The computer implemented method of claim 22, wherein anarrangement of the plurality of previously received but unsatisfiedorders is based on the time of receipt of thereof rounded up to athreshold time increment, the magnitude of the threshold time incrementbeing a function of the magnitude of the determined elapse of time,wherein those previously received but unsatisfied orders having arounded time of receipt within the same threshold time increment areincluded in the same subset.
 31. The computer implemented method ofclaim 22, wherein an arrangement of the plurality of previously receivedbut unsatisfied orders increasingly reduce differentiation of theplurality of previously received but unsatisfied orders by their time ofreceipt as the magnitude of the elapse of time increases.
 32. Thecomputer implemented method of claim 31, wherein as the magnitude of theelapse of time increases, the number of subsets of the plurality ofpreviously received but unsatisfied orders decreases.
 33. A systemcomprising: means for receiving an incoming order of a plurality ofincoming orders for a transaction of a quantity of a financialinstrument at an order price in an electronic trading system, whereinthe electronic trading system is characterized by a processing resourcecapacity; means for storing, the received incoming order in a firstnon-transitory memory; means for determining, an occurrence of an event,wherein the event comprises a feedback signal indicative of availableprocessing resource capacity of the electronic trading system, whereinthe feedback signal indicative of available processing resource capacityof the electronic trading system regulates the electronic trading systemto process the plurality of incoming orders according to availableprocessing resource capacity of the electronic trading system byregulating the incoming flow of the plurality of incoming ordersrelative to available processing resource capacity of the electronictrading system; and means for forwarding, upon the occurrence of theevent, at least a subset of the stored received incoming orders.
 34. Thesystem of claim 33, wherein the event further comprises one of an elapseof an interval of time, receipt of an acknowledgement from theelectronic trading system acknowledging receipt of previously forwardedincoming orders, or where the number of stored received incoming ordersexceeds a threshold.
 35. The system of claim 34, further comprising:means for receiving and storing the forwarded subset of the storedincoming orders in a second non-transitory memory in which a pluralityof previously received but unsatisfied orders are stored, wherein eachof the plurality of previously received but unsatisfied orders ischaracterized by a time of receipt at which each previously received butunsatisfied order was received; means for determining an elapse of time;means for rearranging, based on a magnitude of the elapse of time, theplurality of previously received but unsatisfied orders into at leastone non-overlapping subset thereof, each comprising at least one of theplurality of previously received but unsatisfied orders, as a functionof the time of receipt thereof; means for identifying, one or moresuitable orders of the previously received but unsatisfied orders towhich to allocate the quantity of each of the received subset of thestored incoming orders; and means for allocating, the quantity of eachof the received subset of the stored incoming orders to at least one ofthe identified suitable previously received but unsatisfied ordersaccording to a first allocation algorithm and subsequently thereto,allocating the quantity allocated to each subset of records for furtherallocation among the identified suitable previously received butunsatisfied orders stored therein according to a second allocationalgorithm.